Must Online Retailers Constantly Innovate and Experiment to Survive and Prosper?

Must Online Retailers Constantly Innovate and Experiment to Survive and Prosper?

Nils Magne Larsen (UiT - The Arctic University of Norway, Norway) and Tor Korneliussen (Nord University, Norway)
DOI: 10.4018/978-1-4666-9787-4.ch044
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Background

Ever since dot-com retailers, direct marketers and more traditional “bricks-and-mortar” stores started to embrace the Internet, academics and practitioners have emphasized the need for entrepreneurial spirit and hyper-innovative practices in this new digital marketing environment. The following statements are illustrative:

In today’s turbulent business environments, more and more companies need a development process that embraces change – not one that resists it. (Iansiti & MacCormack, 1997, p. 108)

Firms that ... are willing to experiment with new product and service offerings will become the best equipped to compete in the world of e-commerce. (Hodgetts, Luthans, & Slocum Jr, 1999, p. 12)

The key to success will be innovation rather than simply replicating the existing in-store approach. (Hart, Doherty, & Ellis‐Chadwick, 2000, p. 970)

There is a demand for innovative managerial behavior present in e-business and e-commerce firms must innovate to survive. (Kickul & Gundry, 2001, p. 355)

Only risk-taking and experimentation can teach us which developments will have a sustainable future. (Gummesson, 2002, p. 49)

Internet-based entrepreneurs must search for innovative ways of enhancing efficiency, lowering costs, and improving technological processes throughout their entire organization. (Liao, Kickul, & Ma, 2009, p. 265)

Entrepreneurship and innovation is a crucial factor for the long term sustainability of e-commerce and e-business. (Hasan & Harris, 2009, p. 96)

The rapid change that has characterized Internet technologies and web-based systems so far makes it understandable that online retailers have difficulties in knowing which avenues are viable to travel and which would be a waste of money. Innovation, risk-taking and experimentation would of course provide them with some answers, but we question whether this is a profitable route for an online retailer.

We do not disregard the need for some experimental behavior online (e.g. A/B-testing of various approaches to improve website effectiveness in terms of clicks, traffic, conversions, and view-troughs), nor do we underestimate the value of change in the online retail context. What we question is whether retailers need to adopt an entrepreneurial approach were they innovate boldly and regularly while taking considerable risks. Although such a question appeared in the literature already in the beginning of the new century, when for instance Kickul and Gundry (2001, p. 359) asked for more research to determine whether “hyper-innovative” practices are required in e-commerce organizations, it is not until recently academic research has shed more light on this issue. The purpose of this chapter is to draw upon this research when we discuss the performance consequences of online retailers being entrepreneurial orientated. In addition to discussing the findings from our own research conducted in the Norwegian online retailing sector, we review relevant contributions reported in the e-commerce literature.

Key Terms in this Chapter

Bricks and Mortar Store: A physical retail store were the business deals with its customers face to face.

Agility: The ability to adjust and adapt to new innovative ideas.

Dot-Com Retailer: A firm that does most of its business on the Internet. The term also describes Internet start-ups from the 1990s having venture capital funding and launched with very thin business plans.

Benchmarking: A process were firms compare their own business processes and performance to best practices in their own industry or to practices of successful firms in other industries.

Hyper-Innovation: A speed and magnitude of innovation without precedent.

Multidimensional: Something that involves several dimensions or aspects.

A/B-Testing: A randomized experiment with two variants, A and B, used to identify the results of changes to web pages.

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