Cost reduction analysis in the online retail as compared to the classic retail

• Author: Baba M. C.
• Pages: 141-146

Bulletin of the Transilvania University of Braşov

Series V: Economic Sciences • Vol. 8 (57) No. 1 - 2015

Cost reduction analysis in the online retail as

compared to the classic retail

Mirela Camelia BABA1

Abstract: The industry of retail has been segmented by new technologies, but the financial

performance of every segment is far from explaining the market share. An exploratory study

is necessary in order to explain the appeal for entrepreneurs. A comparison between two

new forms of retail is used to understand the business models in this industry. Due to the fact

that the maturity of the new segment of retail is different in various countries, the study

cases focused on some leading firms from USA, China and Romania ) are important to

design a probable trend for the online commerce. General theoretical benchmarks, validated

by current practice are used in case studies, as well as innovative approaches and well-

known examples of successful retail companies.

Key-words: e-commerce, performance, strategy, cost leadership.

1. Introduction

Retail industry can be divided into several segments in order to facilitate the study of

one component. Laudon and Traver (2014) discussed the seven segments (durable

goods, general merchandise, food and beverage, specialty stores, gasoline and fuel,

mail order/telephone order (MOTO), and online retail firms); as seen, the list

includes the online retail, which held in 2012 in the US (according to the US Census

Bureau) only 6% of the total retail. Each segment uses new technologies in its own

way, and this is rapidly changing under the pressure of innovation. Alongside, it is

to be noted that the quality of the human capital is crucial for any company, enabling

it to maintain a competitive advantage in this knowledge economy era, away along

with technology and innovation (Drumea, 2012).

Online retail is closely related to another segment, the mail order/telephone

order (MOTO), which is actually a predecessor of e-commerce. The companies in

this segment have created the experience of rapid delivery of small orders, and some

have developed their own business online. In line of this "legacy" there are now

"pure" online retailers, which do not own any “physical” store, as well as so-called

“multichannel” retailers that combine the online approach with the classic retail

through their own stores.

1 Transilvania University of Braşov, mirela.baba@unitbv.ro