Comparing the Tradeoffs in Internet and Physical Store Retailing

[Kristijntje]

The behind-the-scenes process is not necessarily so seamless. As the pressure mounts for traditional retailers operating through physical stores to also offer product for sale over the Internet—otherwise known as multi-channel retailing—so too do the operational challenges. Retail over the Internet and traditional retail have vastly different drivers of demand, product variety issues, optimal inventory configurations, cost structures, supply chain structures and delivery mechanisms. Cost is a particular issue in terms of distribution and warehousing, for example. Firms either have to have their supply chain set up to have high transportation costs if they are dealing with Internet delivery or very low transportation costs if they are dealing with a traditional retail store delivery. The two don’t mix. Ultimately, designing a supply chain to serve both traditional and Internet retail channels well is difficult...

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