Barker 1

Layton Barker
Instructor: Malcolm Campbell
English 1103 H
10/2/2013
Rough Draft: Is E-commerce Creating or Destroying?
Beginning in the 40s with the dawn of the computer age and eventually the birth of online
shopping, consumers have come to realize the simplicity of comparing millions of products from
a multitude of stores at the touch of their fingertips. It takes what could have been hours of
shopping and instead, turns it into a brief 30 minute cyber space shopping spree. A person does
not have to leave the comfort of their own home because the product can simply be delivered to
their doorstep. In addition to saving time and effort, this access to online shopping can also save
an individual a substantial amount of money. Since businesses do not have the overhead of a
physical address, they can offer a lower cost product through the internet. Shopping in the
virtual world saves time, effort, and money, so it is no wonder that many businesses within the
retail sector are making the transition to electronic commerce (e-commerce), which the Merriam-
Webster dictionary defines as activities that relate to the buying and selling of goods and
services over the internet. As societys generation of computer savvy customers evolves to a
predominately online shopping culture, we must consider the negative effects of this trend for e-
commerce.
Foremost, a primary concern about retails shift to e-commerce is that they will force
traditional stores out of business. With the convenience of e-commerce, more and more people
are seeing little reason to physically visit a store to buy a product. Why would someone drive to
a store, walk around the store to find the product, and then, wait in line to purchase the product,
Stirling Menzies 12/2/13 8:36 AM
Comment [1]: Pave you LhoughL abouL a
dlfferenL lnLro? Maybe a sLory or oLher
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Stirling Menzies 11/4/13 3:20 PM
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when they could just type the products name in the stores website, instantly find it, and have it
delivered to their house? In some cases, people even visit stores to look at products and then,
simply return home to order the product online. This kind of change in behavior favors e-
commerce. However, traditional retailers do have advantages over online stores. For example,
an in-store customer can purchase an item and immediately have it in their hands, while e-
commerce requires a person to wait for the product to be delivered. Although they can have it
delivered the next day that will cost extra money. Also, traditional stores allow the consumer to
physically see, feel, test, and try on the product, depending on the nature of the product. All e-
commerce can do is offer a picture and maybe a video of how the product works. Obviously,
consumers must way the advantages and disadvantages offered by traditional stores in regard to
e-commerce.
However, the effect of e-commerce on economic markets is the broader question. Has
the introduction of e-commerce within the retail sector caused the development of a new market
segment, that until now had been unfilled, or is it in direct competition with traditional
businesses threatening to eventually drive them out of business? Two theories have arisen to
directly address scenarios, such as this one. The new niche theory states that changes in
environment may create a new niche that has not been occupied by incumbent firms or may not
fit well with existing organizational structures or business models of incumbent firms to occupy
it (Islam, Lertpittayapoom, and Tangpong 133). The opposing theory, called creative
destruction, involves the process by which entrepreneurs make their entry into established
markets through inventions and innovations, which have greater appeals to buyers, and creatively
destroy the existing market structure of incumbent firms (Islam, Lertpittayapoom, and
Tangpong 133). These two theories directly oppose one another, but which one accurately
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Stirling Menzies 11/4/13 3:24 PM
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Stirling Menzies 11/4/13 3:26 PM
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Stirling Menzies 11/4/13 3:27 PM
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reflects the effects of the transition to e-commerce. So, is the retail sectors transition to
business-to-consumer e-commerce causing new niche formation or creative destruction?
The new niche formation theory suggests that e-commerce is not in competition with
traditional businesses, but rather is filling what use to be a void within the market. Factors that
typically lead to new niche development are changes in technology and/or changes in
consumers culture. In the case of e-commerce, both these factors are present. Advancements in
technology have given businesses the ability to offer this innovative service to its consumers. E-
commerce was not possible until progressions were made in network communication technology,
computer-mediated tools, and information technology. These developments in technology have
also affected the consumers culture. Most people these days have computers or smartphones
and access to the internet, whereas in the past computers and the internet were not so readily
available. The consumers culture has shifted with the advancements in technology, and most
consumers are fully equipped to take advantage of the services offered by e-commerce. The new
niche formation theory points out that not all aspects of e-commerce are in direct conflict with
traditional businesses. Since they can use e-commerce to advertise and market for their store.
Many people will look at products on the businesses website and then, go to the store to actually
purchase the item. According to the Journal of Leadership and Organizational Studies, 51% of
consumers who conduct online product research still go to the traditional store to actually
purchase the product, despite the availability of the ability to purchase the item online (Islam,
Lertpittayapoom, and Tangpong 133). Business can also advertise for printable coupons to be
printed off, which will in turn encourage consumers to visit their stores. In addition, e-commerce
offers a new option for consumers who are unsatisfied with traditional stores hours, store
locations, prices, and lack of information allowing them to purchase these same products online.
Stirling Menzies 11/4/13 3:29 PM
Comment [7]: ?
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For these reasons, the new niche formation theory advocates the idea that e-commerce firms and
traditional firms can coexist or even complement one another because the two exist within
different niches of the market (Islam, Lertpittayapoom, and Tangpong 133).
In a recent New York Times article, Claire Cain Miller and Stephanie Clifford offer
support for the new niche theory and its impact on retail giants, Walmart and Amazon. Walmart
has recently constructed an expansive office in Silicon Valley of San Bruno, California that will
be home to many new employees, as Walmart strives to expand into the e-commerce field.
Amazon, on the other hand, has realized its need for more physical presence and is constructing
more warehouses and pickup locations. Both companies moves indicate that they believe the
future of commerce is not just stores and not just online but a combination of the two (Miller
and Clifford 1). Amazon is a much stronger e-commerce contender with $74.4 billion in revenue
expected for 2013, as compared to Walmarts $10 billion in e-commerce revenue, which
comprised a small portion of its total $500 billion in profit. Walmart.com reported a measly
62.5 million visitors in August compared to Amazons 133 million visitors. These statistics
demonstrate the advantage that Amazon has over Walmart within the e-commerce sector and that
Walmart has over Amazon within the physical retail sector. However, Walmart is beginning to
see e-commerce as a new niche for further expansion, while Amazon is beginning to recognize
the advantages of physical stores. The actions of these companies suggest that e-commerce and
physical stores cannot just coexist, but must be integrated into a harmonious, balanced
relationship, ultimately benefitting consumers and corporate bottom lines (Miller and Clifford 1).
On the other hand, the creative destruction theory posits that the transition to e-commerce
is in direct competition with traditional businesses and is destroying the existing market structure
of these traditional businesses. Factors that typically lead to creative destruction normally arise
Stirling Menzies 11/4/13 3:36 PM
Comment [8]: Are Lhese all sLores, or are
small buslnesses ln danger?
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from entrepreneurs innovations that replace existing ones. This scenario could apply to the
transition to business-to-consumer e-commerce, because the onset of online commercial sales
could be directly competing with traditional business and eventually replace them. The
introduction of e-commerce is considered a threat to those businesses that do not possess the
ability to adapt to change by either altering their services or participating in e-commerce
themselves. E-commerce provides businesses with the opportunity to bypass the middle man
and cater directly to the consumers. By eliminating the middleman, businesses can offer their
products at lower prices. In addition, e-commerce offers access to online stores that are not
subject to store hours. Many online stores also allow consumers who have used a product to
comment on its performance; feedback that influences how others feel about products affecting
purchase decisions. E-commerces benefit of saving time, money, and effort gives it what
appears to be a sizable advantage over traditional businesses. In this way, the creative
destruction theory suggests that the transition to business-to-consumer e-commerce is taking
sales away from traditional businesses and could eventually, force these traditional businesses
out of the market (Islam, Lertpittayapoom, and Tangpong 134).
In the popular online magazine, Slate, Matthew YGlesias supports the creative
destruction theory and also addresses the situation occurring between Walmart and Amazon.
Yglesias states that Walmart has finally decided that its time to take e-commerce seriously.
He cites the construction of the new Silicon Valley office as proof of this change. However,
even though Walmart is transitioning, Yglesias doubts that Walmart will ever be able to catch
Amazon, because he remarks that being such a successful physical retailer hinders their
evolution in cyber space trade. Yeglesias commentary indicates that he is in agreement with the
creative destruction theory, predicting that Walmart is going to have a hard time competing
Stirling Menzies 11/4/13 3:42 PM
Comment [9]: ?ou could Lake Lhose" ouL
Stirling Menzies 11/4/13 3:44 PM
Comment [10]: Mlddleman
Stirling Menzies 11/4/13 3:43 PM
Comment [11]: 1ry Lo make Lhls sound less
repeLlLlve, seems llke you've already gone
over Lhls lnfo before.
Stirling Menzies 11/4/13 3:46 PM
Comment [12]: noL sure lf you need a
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Stirling Menzies 11/4/13 3:47 PM
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Stirling Menzies 11/4/13 3:47 PM
Comment [14]: .magazlne SlaLe, MaLLhew
?Cleslas, supporLs..
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online because its physical stores will beat out its e-commerce efforts. Yglesias points out that
this position may seem counterintuitive because Walmarts physical stores can serve as delivery
points for products ordered online and use this existing infrastructure to be a real e-commerce
competitor. However, he contends that this logic did not seem to work for Barnes & Noble or
BestBuy.com, which both could not defeat Amazon because they already had a pre-existing
business in the field they were trying to enter. In Yglesisas opinion, Walmarts physical stores
and e-commerce efforts are both occupying the same niche and competing for the same
customers, therefore Walmart is essentially competing within itself. Since Walmart is a
successful physical retailer, the physical stores will ultimately overpower its e-commerce
expanses and Amazon will continue to be the major e-commerce power because of its lack of
competitive physical presence (Yglesias).
Thus far, two differing opinions of the rivalry between Walmart and Amazon have been
explored; one in support of the new niche theory and the other in support of the creative
destruction theory. Both theories possess merit, but which one more accurately depicts the
market dynamic? Apparently Walmart has made some advances within the e-commerce sector
before the new Silicon Valley office because they maintained a website and other online
services. However, it is unclear whether Walmart will ever be able to catch up to Amazons
success within the e-commerce sector. Amazon has a large lead, but Walmart is beginning to
establish its online presence. While being a successful physical retailer may hinder some aspects
of Walmarts e-commerce efforts, the corporation must see a large benefit to engaging in the
practice. Walmart would not invest millions of dollars into a new facility specifically designed
to extend its e-commerce influence unless there was a promising monetary gain to be obtained.
Stirling Menzies 11/4/13 3:50 PM
Comment [15]: ApparenLly,
Stirling Menzies 11/4/13 3:52 PM
Comment [16]: 1ry Lo have Lhls senLence
flow wlLh Lhe paragraph. AlLhough WalmarL ls
beglnnlng Lo esLabllsh lLs onllne presence,
Amazon remalns Lo have a large lead.
Barker 7

At this point in time, Walmarts actions appear to support the new niche theory as they seek to
expand online operations, in order to turn a bigger profit.
Considering the two theories, it is obvious that both contain a substantial amount of
validity. The vast frontier of e-commerce is definitely an area for further exploration as
businesses look to tap its potential. Both theories agree that e-commerce is the introduction has
ushered in a new breed of business, but the question is, does this new style coexist with
traditional businesses or hinder them? A study conducted by Chanchai Tangpong, Muhammad
Islam, and Nongkran Lertpittayapoom examined this issue. They gathered retail sales figures
made through e-commerce and traditional retail stores from the U.S. Census Survey and
statistically analyzed the data. Their study split the retail sector into fourteen product categories
that were divided into either the digitally-unrelated retail sector or digitally-related retail sector.
The digitally-unrelated sectors product categories were clothing and clothing accessories,
drugs, health aids, and beauty aids, electronics and appliances, food, beer, and wine,
furniture and home furnishings, office equipment and supplies, sporting goods, toys,
hobby goods, and games, other merchandise, and other nonmerchandise.. The digitally-
related sectors product categories were books and magazines, computer hardware,
computer software, and music and videos. Results showed that the theory that applied
varied between the two types of sectors. In the digitally-unrelated retail sector, the new niche
formation theory applied, while in the digitally-related sector, the creative destruction theory
applied. This means that businesses in the digitally-unrelated retail sector can engage in e-
commerce if they possess the resources, but if they do not, then they should not be adversely
affected. However, businesses in the digitally-related sector should engage in e-commerce,
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otherwise they will lose sales and potentially be driven out of business in the future (Islam,
Lertpittayapoom, and Tangpong 138).
The findings of this study seem to align with the direction in which Walmart and Amazon
are headed. Since Walmart is primarily a retail business involved in the digitally-unrelated
sector, it is logical that because they possess the resources, they wish to engage in e-commerce.
Walmarts addition of e-commerce will not hinder its business, but simply expand upon what is
already there. The study supports Walmarts belief that expanding into the e-commerce sector is
like expanding into a new niche. Whether or not Walmart will be able to catch up to the big e-
commerce giant, Amazon, remains to be seen. However, for now, Walmart is going to give it
their best shot, as they try to revamp and revitalize their e-commerce efforts. Whereas, Amazon
is a perfect example of a company that falls subject to the creative destruction theory. Amazon is
centered within the digitally-related sector and therefore, must engage in e-commerce, if it does
not want to experience a negative economic impact. Fortunately for Amazon, their whole
business model is concentrated within the e-commerce sector. Thus, they are not in danger of
feeling the negative consequences associated with the creative destruction theory. It appears that
both companies, Walmart and Amazon, are moving in the directions supported by the statistical
data and theories associated with their varying sectors. The two businesses may clash more as
both strive to encroach their rivals market, as Amazon moves to have more of a physical
presence and Walmart expands into the e-commerce niche (Islam, Lertpittayapoom, and
Tangpong 138).
So, is the retail sectors transition to business-to-consumer e-commerce causing new
niche formation or creative destruction? Well, the answer appears to be that it is dependent on
whether you are considering the digitally-related or digitally unrelated retail sector. The new
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niche formation theory applies to the digitally-unrelated retail sector, while the creative
destruction theory applies to the digitally-related retail sector. It seems that e-commerce is
affecting some businesses negatively, while others are unaffected. Regardless, it appears that e-
commerce is here to stay. Therefore, businesses with the resources to engage in e-commerce
should do so, because it will aid most businesses within the retail sector. For digitally-unrelated
businesses, it will contribute economic growth and for digitally-related businesses, it is becoming
a necessity to survive. The rivalry between Walmart and Amazon is a testimony to these two
theories. In the end, it appears that e-commerce benefits consumers, whom can continue
clicking and filling their online shopping cart in the convenience of their own home.
Logically sound paper, good use of information from sources although your paper
heavily relied on two sources and even one page from each of the sources. Perfect example of
using highly developed vocabulary.








Barker 10

Works Cited
Merriam-Webster, Incorporated. Merriam-Webster. Web. 2 Oct. 2013.
Miller, Claire, and Clifford, Stephanie. To Catch Up, Walmart Moves to Amazon Turf.
NYTimes.com. The New York Times, 19 Oct. 2013. Web. 20 Oct. 2013.
Tangpong, Chanchai, Islam, Muhammad, and Lertpittayapoom, Nongkran. "The Emergence
of Business-to-Consumer E-Commerce: New Niche Formation, Creative Destruction, and
Contingency Perspectives." Journal of Leadership & Organizational Studies 16.2 (2009):
131-140. Print. 2 Oct. 2013.
Yglesias, Matthew. Bentonville Blues Why Walmarts e-commerce efforts will almost
certainly fail. Slate.com. Slate, 21 Oct. 2013. Web. 21 Oct. 2013.