Distribution strategies for online retailers

The Internet provides retailers with potentially powerful opportunities to boost sales, increase market share, and generate new business through new services. One of the challenging questions that retailers are facing in that respect is how to organize the logistic fulfillment processes during and after the transaction has taken place. Based on a survey of 55 online retailers (both traditional and Internet-only) this paper investigates the distribution strategies of these different retailer types. This includes the use of infrastructure not particularly designed for delivery to Internet customers like stores and store warehouses, the logistics outsourcing strategy and the company’s choice of delivery area. The independent variables studied are the delivery lead times offered to customers, the assortment choice, the number of Internet customer orders and the company type (traditional retailer or not). It is argued and demonstrated that the distribution channel for Internet customers should be integrated with existing operations, but for larger Internet order volumes, traditional retailers should switch to direct-delivery distribution centers. The outsourcing and delivery area decision appear to be mainly determined by the complexity of the assortment.