Barker 1 Layton Barker Instructor: Malcolm Campbell English 1103 H 10/2/2013 Rough Draft: Is E-commerce Creating or Destroying?

Beginning in the 40s with the dawn of the computer age and eventually the birth of online shopping, consumers have come to realize the simplicity of comparing millions of products from a multitude of stores at the touch of their fingertips. It takes what could have been hours of shopping and instead, turns it into a brief 30 minute cyber space shopping spree. A person does not have to leave the comfort of their own home because the product can simply be delivered to their doorstep. In addition to saving time and effort, this access to online shopping can also save an individual a substantial amount of money. Since businesses do not have the overhead of a physical address, they can offer a lower cost product through the internet. Shopping in the virtual world saves time, effort, and money, so it is no wonder that many businesses within the retail sector are making the transition to electronic commerce (e-commerce), which the MerriamWebster dictionary defines as activities that relate to the buying and selling of goods a nd services over the internet. As societys generation of computer savvy customers evolves to a predominately online shopping culture, we must consider the negative effects of this trend for ecommerce. Foremost, a primary concern about retails shift to e-commerce is that they will force traditional stores out of business. With the convenience of e-commerce, more and more people are seeing little reason to physically visit a store to buy a product. Why would someone drive to a store, walk around the store to find the product, and then, wait in line to purchase the product,
Comment [SM2]: Not sure if this is necessary, you can gather what e-commerce is from previous sentences Comment [SM1]: Have you thought about a different intro? Maybe a story or other attention grabber?

Barker 2 when they could just type the products name in the stores website, instantly find it, and have it delivered to their house? In some cases, people even visit stores to look at products and then, simply return home to order the product online. This kind of change in behavior favors ecommerce. However, traditional retailers do have advantages over online stores. For example, an in-store customer can purchase an item and immediately have it in their hands, while ecommerce requires a person to wait for the product to be delivered. Although they can have it delivered the next day that will cost extra money. Also, traditional stores allow the consumer to physically see, feel, test, and try on the product, depending on the nature of the product. All ecommerce can do is offer a picture and maybe a video of how the product works. Obviously, consumers must way the advantages and disadvantages offered by traditional stores in regard to e-commerce. However, the effect of e-commerce on economic markets is the broader question. Has the introduction of e-commerce within the retail sector caused the development of a new market segment, that until now had been unfilled, or is it in direct competition with traditional businesses threatening to eventually drive them out of business? Two theories have arisen to directly address scenarios, such as this one. The new niche theory states that changes in environment may create a new niche that has not been occupied by incumbent firms or may not fit well with existing organizational structures or business models of incumbent firms to occupy it (Islam, Lertpittayapoom, and Tangpong 133). The opposing theory, called creative destruction, involves the process by which entrepreneurs make their entry into established markets through inventions and innovations, which have greater appeals to buyers, and creatively destroy the existing market structure of incumbent firms (Islam, Lertpittayapoom, and Tangpong 133). These two theories directly oppose one another, but which one accurately
Comment [SM5]: Sounds a tad awkward on economic markets is a broad question (maybe?) Comment [SM4]: Weigh Comment [SM3]: Avoid using kind of

Comment [SM6]: Id separate this sentence with your ? and start a new sentence

Barker 3 reflects the effects of the transition to e-commerce. So, is the retail sectors transition to business-to-consumer e-commerce causing new niche formation or creative destruction? The new niche formation theory suggests that e-commerce is not in competition with traditional businesses, but rather is filling what use to be a void within the market. Factors that typically lead to new niche development are changes in technology and/or changes in consumers culture. In the case of e-commerce, both these factors are present. Advancements in technology have given businesses the ability to offer this innovative service to its consumers. Ecommerce was not possible until progressions were made in network communication technology, computer-mediated tools, and information technology. These developments in technology have also affected the consumers culture. Most people these days have computers or smartphones and access to the internet, whereas in the past computers and the internet were not so readily available. The consumers culture has shifted with the advancements in technology, and most consumers are fully equipped to take advantage of the services offered by e-commerce. The new niche formation theory points out that not all aspects of e-commerce are in direct conflict with traditional businesses. Since they can use e-commerce to advertise and market for their store. Many people will look at products on the businesses website and then, go to the store to actually purchase the item. According to the Journal of Leadership and Organizational Studies, 51% of consumers who conduct online product research still go to the traditional store to actually purchase the product, despite the availability of the ability to purchase the item online (Islam, Lertpittayapoom, and Tangpong 133). Business can also advertise for printable coupons to be printed off, which will in turn encourage consumers to visit their stores. In addition, e-commerce offers a new option for consumers who are unsatisfied with traditional stores hours, store locations, prices, and lack of information allowing them to purchase these same products online.
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Barker 4 For these reasons, the new niche formation theory advocates the idea that e-commerce firms and traditional firms can coexist or even complement one another because the two exist within different niches of the market (Islam, Lertpittayapoom, and Tangpong 133). In a recent New York Times article, Claire Cain Miller and Stephanie Clifford offer support for the new niche theory and its impact on retail giants, Walmart and Amazon. Walmart has recently constructed an expansive office in Silicon Valley of San Bruno, California that will be home to many new employees, as Walmart strives to expand into the e-commerce field. Amazon, on the other hand, has realized its need for more physical presence and is constructing more warehouses and pickup locations. Both companies moves indicate that they believe the future of commerce is not just stores and not just online but a combination of the two (Miller and Clifford 1). Amazon is a much stronger e-commerce contender with $74.4 billion in revenue expected for 2013, as compared to Walmarts $10 billion in e-commerce revenue, which comprised a small portion of its total $500 billion in profit. Walmart.com reported a measly 62.5 million visitors in August compared to Amazons 133 million visitors. These statistics demonstrate the advantage that Amazon has over Walmart within the e-commerce sector and that Walmart has over Amazon within the physical retail sector. However, Walmart is beginning to see e-commerce as a new niche for further expansion, while Amazon is beginning to recognize the advantages of physical stores. The actions of these companies suggest that e-commerce and physical stores cannot just coexist, but must be integrated into a harmonious, balanced relationship, ultimately benefitting consumers and corporate bottom lines (Miller and Clifford 1). On the other hand, the creative destruction theory posits that the transition to e-commerce is in direct competition with traditional businesses and is destroying the existing market structure of these traditional businesses. Factors that typically lead to creative destruction normally arise
Comment [SM8]: Are these all stores, or are small businesses in danger?

Barker 5 from entrepreneurs innovations that replace existing ones. This scenario could apply to the transition to business-to-consumer e-commerce, because the onset of online commercial sales could be directly competing with traditional business and eventually replace them. The introduction of e-commerce is considered a threat to those businesses that do not possess the ability to adapt to change by either altering their services or participating in e-commerce themselves. E-commerce provides businesses with the opportunity to bypass the middle man and cater directly to the consumers. By eliminating the middleman, businesses can offer their products at lower prices. In addition, e-commerce offers access to online stores that are not subject to store hours. Many online stores also allow consumers who have used a product to comment on its performance; feedback that influences how others feel about products affecting purchase decisions. E-commerces benefit of saving time, money, and effort gives it what appears to be a sizable advantage over traditional businesses. In this way, the creative destruction theory suggests that the transition to business-to-consumer e-commerce is taking sales away from traditional businesses and could eventually, force these traditional businesses out of the market (Islam, Lertpittayapoom, and Tangpong 134). In the popular online magazine, Slate, Matthew YGlesias supports the creative destruction theory and also addresses the situation occurring between Walmart and Amazon. Yglesias states that Walmart has finally decided that its time to take e -commerce seriously. He cites the construction of the new Silicon Valley office as proof of this change. However, even though Walmart is transitioning, Yglesias doubts that Walmart will ever be able to catch Amazon, because he remarks that being such a successful physical retailer hinders their evolution in cyber space trade. Yeglesias commentary indicates that he is in agreement with the creative destruction theory, predicting that Walmart is going to have a hard time competing
Comment [SM13]: Remove first comma and italicize Slate Comment [SM14]: magazine Slate, Matthew YGlesias, supports. Comment [SM12]: Not sure if you need a comma, but again, Im not sure. Comment [SM10]: Middleman Comment [SM11]: Try to make this sound less repetitive, seems like youve already gone over this info before. Comment [SM9]: You could take those out

Barker 6 online because its physical stores will beat out its e-commerce efforts. Yglesias points out that this position may seem counterintuitive because Walmarts physical stores can serve as delivery points for products ordered online and use this existing infrastructure to be a real e-commerce competitor. However, he contends that this logic did not seem to work for Barnes & Noble or BestBuy.com, which both could not defeat Amazon because they already had a pre-existing business in the field they were trying to enter. In Yglesisas opinion, Walmarts physical stores and e-commerce efforts are both occupying the same niche and competing for the same customers, therefore Walmart is essentially competing within itself. Since Walmart is a successful physical retailer, the physical stores will ultimately overpower its e-commerce expanses and Amazon will continue to be the major e-commerce power because of its lack of competitive physical presence (Yglesias). Thus far, two differing opinions of the rivalry between Walmart and Amazon have been explored; one in support of the new niche theory and the other in support of the creative destruction theory. Both theories possess merit, but which one more accurately depicts the market dynamic? Apparently Walmart has made some advances within the e-commerce sector before the new Silicon Valley office because they maintained a website and other online services. However, it is unclear whether Walmart will ever be able to catch up to Amazon s success within the e-commerce sector. Amazon has a large lead, but Walmart is beginning to establish its online presence. While being a successful physical retailer may hinder some aspects of Walmarts e-commerce efforts, the corporation must see a large benefit to engaging in the practice. Walmart would not invest millions of dollars into a new facility specifically designed to extend its e-commerce influence unless there was a promising monetary gain to be obtained.
Comment [SM16]: Try to have this sentence flow with the paragraph. Although Walmart is beginning to establish its online presence, Amazon remains to have a large lead. Comment [SM15]: Apparently,

Barker 7 At this point in time, Walmarts actions appear to support the new niche theory as they seek to expand online operations, in order to turn a bigger profit. Considering the two theories, it is obvious that both contain a substantial amount of validity. The vast frontier of e-commerce is definitely an area for further exploration as businesses look to tap its potential. Both theories agree that e-commerce is the introduction has ushered in a new breed of business, but the question is, does this new style coexist with traditional businesses or hinder them? A study conducted by Chanchai Tangpong, Muhammad Islam, and Nongkran Lertpittayapoom examined this issue. They gathered retail sales figures made through e-commerce and traditional retail stores from the U.S. Census Survey and statistically analyzed the data. Their study split the retail sector into fourteen product categories that were divided into either the digitally-unrelated retail sector or digitally-related retail sector. The digitally-unrelated sectors product categories were clothing and clothing accessories, drugs, health aids, and beauty aids, electronics and appliances, food, beer, and wine, furniture and home furnishings, office equipment and supplies, sporting goods, toys, hobby goods, and games, other merchandise, and other nonmerchandise.. The digitallyrelated sectors product categories were books and magazines, computer hardware, computer software, and music and videos. Results showed that the theory that applied varied between the two types of sectors. In the digitally-unrelated retail sector, the new niche formation theory applied, while in the digitally-related sector, the creative destruction theory applied. This means that businesses in the digitally-unrelated retail sector can engage in ecommerce if they possess the resources, but if they do not, then they should not be adversely affected. However, businesses in the digitally-related sector should engage in e-commerce,

Barker 8 otherwise they will lose sales and potentially be driven out of business in the future (Islam, Lertpittayapoom, and Tangpong 138). The findings of this study seem to align with the direction in which Walmart and Amazon are headed. Since Walmart is primarily a retail business involved in the digitally-unrelated sector, it is logical that because they possess the resources, they wish to engage in e-commerce. Walmarts addition of e-commerce will not hinder its business, but simply expand upon what is already there. The study supports Walmarts belief that expanding into the e -commerce sector is like expanding into a new niche. Whether or not Walmart will be able to catch up to the big ecommerce giant, Amazon, remains to be seen. However, for now, Walmart is going to give it their best shot, as they try to revamp and revitalize their e-commerce efforts. Whereas, Amazon is a perfect example of a company that falls subject to the creative destruction theory. Amazon is centered within the digitally-related sector and therefore, must engage in e-commerce, if it does not want to experience a negative economic impact. Fortunately for Amazon, their whole business model is concentrated within the e-commerce sector. Thus, they are not in danger of feeling the negative consequences associated with the creative destruction theory. It appears that both companies, Walmart and Amazon, are moving in the directions supported by the statistical data and theories associated with their varying sectors. The two businesses may clash more as both strive to encroach their rivals market, as Amazon moves to have more of a physical presence and Walmart expands into the e-commerce niche (Islam, Lertpittayapoom, and Tangpong 138). So, is the retail sectors transition to business-to-consumer e-commerce causing new niche formation or creative destruction? Well, the answer appears to be that it is dependent on whether you are considering the digitally-related or digitally unrelated retail sector. The new

Barker 9 niche formation theory applies to the digitally-unrelated retail sector, while the creative destruction theory applies to the digitally-related retail sector. It seems that e-commerce is affecting some businesses negatively, while others are unaffected. Regardless, it appears that ecommerce is here to stay. Therefore, businesses with the resources to engage in e-commerce should do so, because it will aid most businesses within the retail sector. For digitally-unrelated businesses, it will contribute economic growth and for digitally-related businesses, it is becoming a necessity to survive. The rivalry between Walmart and Amazon is a testimony to these two theories. In the end, it appears that e-commerce benefits consumers, whom can continue clicking and filling their online shopping cart in the convenience of their own home. Logically sound paper, good use of information from sources although your paper heavily relied on two sources and even one page from each of the sources. Perfect example of using highly developed vocabulary.

Barker 10 Works Cited Merriam-Webster, Incorporated. Merriam-Webster. Web. 2 Oct. 2013. Miller, Claire, and Clifford, Stephanie. To Catch Up, Walmart Moves to Amazon Turf. NYTimes.com. The New York Times, 19 Oct. 2013. Web. 20 Oct. 2013. Tangpong, Chanchai, Islam, Muhammad, and Lertpittayapoom, Nongkran. "The Emergence of Business-to-Consumer E-Commerce: New Niche Formation, Creative Destruction, and Contingency Perspectives." Journal of Leadership & Organizational Studies 16.2 (2009): 131-140. Print. 2 Oct. 2013. Yglesias, Matthew. Bentonville Blues Why Walmarts e-commerce efforts will almost certainly fail. Slate.com. Slate, 21 Oct. 2013. Web. 21 Oct. 2013.