Prediction of Survival and Attrition of Click-and-Mortar Corporations

Abstract

The World Wide Web has taken the retail industry by storm. In a short span of 5 to 6 years, millions of users around the globe have been introduced to the Web. Whether shopping for merchandise or simply searching for information, the Web has become the avenue of choice for consumers. According to a recent research report by the Angus Reid Group (www.angusreid.com), as of the end of the year 2000, nearly 120 million of the estimated 300 million worldwide Internet users have already made an online purchase. The Boston Consulting Group (www.bcg.com) estimates the e-tailing market to be about $36 billion by 2001. More than half of all online transactions are still made in the US, with the typical American online shopper making seven purchases over three months with a total spending of $828. Advertising, word of mouth, enhanced security, convenience, and the fun of random surfing are among the various factors frequently cited for the popularity of online shopping. This alternate “shopping mall” has led to a tremendous growth in the number of online companies that have started selling merchandise on the Web, ranging from pet supplies to garden tools to cosmetics. Among these companies, there are some that have a physical presence in retailing, like Barnes and Nobles, Wal-Mart, etc. We call them the brick-and-mortar corporations. There are others which engage solely in online transactions with no physical presence. We call them the click-and-mortar corporations, examples of which are Amazon.com, buy.com, furniture.com, etc.