Online Disintermediation: Differences in the Behavior of Traditional Retailers in Adopting E‐Commerce

Abstract

This paper builds a theoretical argument of how the Internet increases the scope for disintermediation and analyzes the changes in the structure of transaction costs in the case of retailing. The paper treats the Internet as a low‐cost selling technology that needs substantial customers acceptance and a specific business model in order to be a viable alternative to traditional retailing. The proposed model predicts that different types of traditional retailers follow different strategies with respect to e‐commerce depending on their pre‐Internet market positioning. These conclusions are supported by empirical evidence from the adoption strategies, followed by a sample of well‐established U.S.‐based retailers. This study shows that retailers whose traditional selling technology is best approximated by e‐commerce are more likely to be among the first to reap the benefits of low‐cost online distribution.