Assessing the perceived impact of e-commerce on physical distribution and logistics-related functions.

Ndubisi, Nelson Oly

ABSTRACT

This paper examines the salience and impact of e-commerce on the roles of distributors in the semiconductor industry for four different types of products, namely differentiated products, architectural products, technological products, and complex products. Specifically, the study measures the perceived importance of e-commerce and the possibility of e-commerce displacing the offline roles of distributors to customers, producers, and both. Questionnaire and the purposive sampling method were used to collect data from distributors in the semi-conductor industry. The results of the study show that physical distribution and logistics-related functions are becoming more salient with the advent of e-commerce. In addition, the likelihood of e-commerce replacing the offline channels is lowest for complex products as compared to any other product category. Details of the findings are discussed.

KEY WORDS:

E-Commerce Physical Distribution Semi-Conductor Industry Perceived Importance Functions Likelihood of Being Replaced Malaysia

INTRODUCTION

Forecasts that predict the size of online trading revenues in the near future vary from a few hundred billion to a few trillion dollars (van Hooft & Stegwee 2001; Jantan, Ndubisi & Ong, 2003). Arthur Anderson (2000) indicates that electronic business-to-business represents 84% of total e-business revenue and the growth prospects are substantial with the revenues predicted to be anywhere from $2.7 trillion to over $7 trillion in the next three years. There has also been concern that the salience of physical distributors could be undermined by e-commerce.

The existence of distribution channels has helped to make society more efficient in resource allocation. Most producers use intermediaries both to acquire raw materials for production and to bring their products to market. They try to forge distribution channel to facilitate the process of making a product or service available for use or consumption by the consumer or business user (Stern, El-Ansary & Coughlin, 1996). Bagozzi et al., (1998) assert that intermediary creates savings and the savings become more dramatic as the number of producer-consumers increases. Armstrong and Kotler (2003) pointed out that intermediaries play an important role in matching supply and demand, while Waxman (2000) argues that by servicing the thousands of indirect partners who are the customers, midrange distribution adds true value.

However, one of the constantly raised questions with the emergence of e-commerce is whether the offline channels will be emasculated. The purpose of the study therefore, is to understand the perceived importance of e-commerce and its impact on the physical distribution and logistics-related functions for customers, producers, and for both, across four product categories in the Malaysian semi-conductor sector.

LITERATURE REVIEW

Armstrong and Kotler (2003) define distribution channel as a set of inter-dependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business buyer. In most contemporary markets, mass production and consumption have lured intermediaries into the junction between buyer and seller. Intermediaries provide economies of distribution by increasing the efficiency of the process.

Researchers have credited distribution channels with the following roles: information gathering and distribution of marketing research and intelligence information (Sawhney, 2000); promotion (Jantan et al. 2003); contact or prospecting (Sawhney, 2000); matching (Kearney, 2000a); negotiation (Ndubisi et al. 2003); physical distribution (Sawhney, 2000; Kearney, 2000a); financing (Jantan et al. 2003); and risk-taking (Ndubisi et al. 2003; Kearney, 2000a;). Bagozzi et al., (1998) categorizes the distribution functions into three: functions for customers; functions for producers; and functions for both customers and producers. Two forces underlie the need for intermediaries: the discrepancy of quantity (i.e. differences between the quantity typically demanded by customers and the quantity that can be produced economically by manufacturers) and the discrepancy of assortment (differences between the varieties of products typically demanded and economically produce-able varieties (Bagozzi et al., 1998). Middlemen fill these needs by carrying out transactional, physical and facilitating roles.

Generically, e-commerce has fundamentally reshaped business relationships and has caused dramatic shifts in channel power as information and communication imbalances disappear. The Internet technology also allows interactivity. Interactivity is defined as the extent to which a two-way communication flow occurs between the organisation and customers (Mohammed et al. 2003) or other channel stakeholders. The Internet enables an unprecedented level of customer dialogue, which facilitates exchange. Online exchanges are infiltrating distribution channels at an outstanding rate. As growth in the use of Internet accelerates, distributors have been warned repeatedly that they risk being cut out of the channel by aggressive web-savvy, and purely virtual competitors. Gates (in Adelaar, 2000) opines that in recent years, it has been widely accepted that e-commerce signifies the dawn of a friction-free market; structural changes in markets, such as dis-intermediation, would occur due to the impact of electronic trade and electronic information age, albeit, Sarkar et al., (1995) disagrees, stating it is exaggeration because different outcomes are possible such as, cyber-mediation and re-intermediation. Moreover, the high fragmentation of the distribution industry, and the nature of the product sold which differs with respect to need for inspection, personal assistance needed from the expert, etc. has been challenging the idea of physical channel replacement by the Internet. Instead, distributors will compete and collaborate with a new type of Internet-based company--the online exchange (OLE). Online exchanges, which are being created in almost every vertical supply chain, bring together buyers and sellers in ways that were not possible before the advent of Internet. It is believed by many that online exchanges (of the many variations of e-commerce) pose the most important strategic challenges to the offline intermediaries, whereas Fein et al., (1999) believe that distributors can retain an important, and enhanced place in the channel as these exchanges mature.

The issue of the salience of e-commerce and the possibility of replacing the physical channels will depend on a number of factors chief among them being the value-added and the cost of each channel. The transaction cost theory by Coase (in Sarkar et al., 1995) is an often-employed framework in the intermediaries context since it focuses on a firm's choice between internalized, vertically integrated structures, and the use of external market agents for carrying out activities that constitute its value system. In the context of channel decisions, it can be used to articulate process whereby firms either "make or buy" an intermediary function; that is, whether the firm decides to internalize the channel activity within its organizational boundaries, or whether it chooses to rely on the market (Sarkar, et al., 1995). In the situation of choice between physical channels or e-commerce, decision makers have employed the transaction cost perspective. Benjamin and Wigand (1995) examine electronic markets and the industry value chain from a transaction and transaction cost perspective. They argue that transaction cost theory helps to understand how markets and hierarchies are chosen. In free market economies, one can observe two basic mechanisms for coordinating the flow of materials and services through adjacent steps in the value chain: markets and hierarchies. Williamson (1981) further classifies transactions into those that support coordination between multiple buyers and sellers (i.e. market transactions), and those supporting coordination within the firm as well as industry value chain (i.e. hierarchy transactions). Hence, the price a product is sold consists of three elements: production costs, coordination costs, and profit margin. Benjamin and Wigand (1995) suggest that the chain of market hierarchies, which bypasses the distributor, will result in a lower purchase price for the customer. Recent research by Kearney (2000b) shows that production costs seem to be under control, but web-based processes can: (1) save another 10-30% from operating costs; (2) cut cycle times by anything up to 90%; and (3) virtually eliminate the supply and demand mismatches that cause inventory build-ups and stock-outs.

It has been noted that intermediaries add significant costs to the value chain, which are reflected in a higher final price of goods and services (Sarkar, Butler & Steinfield, 1995). As illustrated in Benjamin and Wigand (1995), in the high quality shirts market, it would be possible to reduce the retail price by almost 62% if wholesalers and retailers could be eliminated from the traditional value chain. Moreover, since the cost of creating value is a function of how well the activities in the value chain are coordinated, and integrated (Delphi Group, 2000), intermediaries who are unable to coordinate and integrate activities at reduced cost will suffer market loss to this newer marketing arrangement--the E-commerce. Kirchmer (2004) has reported that the Internet is a major enabler for the improvement of supply chain management and customer relationship management. In many organizations, the resulting networks of e-business processes are designed and implemented using available industry standards in the form of reference models such as supply chain reference model (SCOR), the RosettaNet Standards, etc. (Kirchmer 2004).

Schmitz (2000) comments that the effects of e-commerce on intermediation depend on the characteristics of the goods under consideration. Schmitz considers high degrees of standardization, a low complexity of valuation, and ease of description as prerequisites to distribute goods via e-commerce. King and Kang (2000) indicate that product complexity is positively correlated to an e-shopper's propensity to use a vehicle other than the Internet to close a transaction. Connors (2000) reports that technological advances are producing many products more complex than what came before, so it is essential to get active guidance from technicians for customizing, integrating, installing, documenting, and maintaining these systems. Waxman (2000) holds the view that relationship with customer is still required even though the Internet may migrate to an order fulfillment vehicle. Manufacturers of many types of industrial goods tend to be more engineering than marketing-oriented, therefore, it is not surprising that they frequently turn marketing problems to distribution specialists. This is one of the reasons why industrial products, more so than consumer products has been a particularly viable sector of wholesaling over the years (Stern et al, 1996). Moreover, distribution goals depend in part on other product characteristics namely, unit value, standardization, bulkiness, complexity, stage of product life cycle (Pelton et al. 1997), which affect decision about whether intermediaries should be used or which distribution channel to use. Industrial products more so than other product categories tend to be more complex, and the relevant properties are more technical in nature. The financial services industry in general was an early adopter of online technologies such as value added networks and has been equally early in adopting the Internet through online stock-broking and online banking (Bauer & Colgan 2001).

Some researchers argue in favor of physical channel based intermediation, while others have feared its overthrow or dis-intermediation. Wigand (1996) defines dis-intermediation as the displacement of market intermediaries, enabling direct trade between sellers and buyers without agents. Schmitz (2000) notes that the notion that e-commerce will lead to dis-intermediation seems to be widely accepted in the scientific community and well established in the popular debates. Schmitz further argues that elimination of intermediaries will have one of two causes, (1) there is no longer a demand for the services provided by the intermediary, or (2) the provider of these services is integrated into another company at a different step in the value chain and the service will be produced internally. Benjamin and Wigand (1995) suggest that when appropriate information technology can reach the consumer directly... the manufacturer can use the national information infrastructure to leap over all intermediaries. In turn Picot et al., (1997) argue that with the support of information and communication technology, principals could acquire the agent's superior problem solving capabilities, thus enabling them to fulfill the originally delegated tasks on their own. In line with above argument, Pitt et al., (1999) reason that many intermediaries will die out, while new channels and new intermediaries will take their places as a result of the emergence of Internet, and the World Wide Web will change distribution like no other environmental force since the industrial revolution. Other works on channel impact of e-commerce (e.g. Sawhney, 2000) categorize richness of physical interactions in the buying process and the intensity of information in the buying process as two main factors influencing whether a company should discontinue its channel partners.

While the argument on intermediation or dis-intermediation drags, recent developments reveal a form of collaboration between producers and channels partners with the help of advancement in information technology. 'Partner Relationship Management', focuses on information that enables channels partners to quickly act on the product and customer data they receive from vendors (Connors, 2000) by utilizing specialized extranets that enable producers and their channels partners to share and jointly manage business processes to facilitate sales management and product information sharing, offering secure websites that afford partners access to all a producer's data--leads, profiles, and sales support documents (Connors, 2000). Survey conducted by Johnson (1999) on industrial equipment distributors shows that dependence, flexibility, continuity expectations, and relationship age, encouraged the distributor's strategic integration of its supplier relationship.

It has also been suggested that some developments (e.g. increased efficiency and availability of truck transportation, increased availability and access to electronic data interchange via WWW, growth of larger retailers) threaten the overall viability of distributors, or at least limit their ability to perform certain functions profitably, whereas others create new opportunities for distributors growth and expansion, and new ways of doing business (Bagozzi et al., 1998). Schmitz (2000) submits that the effects of the diffusion of e-commerce would not reduce the functions of distributors in gathering, organizing, and evaluating information, instead the informational efficiency of intermediation will prevail. It is useful therefore to understand the importance of e-commerce to distributors and the place of brick and mortar in the wake of e-commerce.

METHODOLOGY

This study investigates the perceived importance of e-commerce and the likelihood of replacing the physical performance of distribution functions for four product types namely, differentiated products, architectural products, technological products, and complex products in the semi-conductor industry, based on Tidd et al., (1997) and Bagozzi et al., (1998) models. Tidd and colleagues developed the two-by-two matrix of technological and market novelties resulting to four product categorizations identified earlier.

For complex products both the technologies and markets are novel, and co-evolve. In this case there is no clearly defined use of a new technology, but over time developers work with lead users to create new applications. The development of multimedia products and services is a recent example of such a co-evolution of technologies and markets.

Technological Products are novel technologies developed to satisfy known customer needs. Such products and services compete on the basis of performance, rather than price or quality. Here, innovation is mainly driven by developers.

Architectural Products are existing technologies applied or combined to create novel products or services, or new applications. Competition is based on serving specific market niches and on close relations with customers. Innovation typically originates or is in collaboration with potential users.

Differentiated Products are those in which both the technologies and markets are mature, and most innovations consist of the improved use of existing technologies to meet a known customer need. Products and services are differentiated on the basis of packaging, pricing and support.

[FIGURE 2 OMITTED]

Bagozzi et al.'s (1998) model of distribution functions was adapted to categorize distribution functions into three major groups--functions for customers (namely providing right attribute and right quantity), functions for producers (e.g. storing, financing, information gathering) and functions for both customers and producers (such as risk reduction, educating customers and representing producer, safe transportation, timely transportation, promoting/highlighting new products, and promotional programs for sales force).

Since a number of studies (e.g. Jantan et al. 2003; King & Kang 2000; Schmitz 2000) have shown that the nature of the product is important factor in determining whether or not transaction will be done online, an investigation of different product categories in the semi-conductor industry is needful as there is currently no known study focusing on this sector. It is also important to understand the changes in the importance of the physical distribution and logistics-related functions, given the advent of e-commerce. It is therefore hypothesized as follows:

The physical distribution and logistics related functions for customers are becoming increasingly important across the four product categories given the advent of e-commerce (hypothesis 1).

The physical distribution and logistics related functions for producers are becoming increasingly important across the four product categories given the advent of e-commerce (hypothesis 2).

The physical distribution and logistics related functions for both customers and producers are becoming increasingly important across the four product categories given the advent of e-commerce (hypothesis 3).

The ranking of perceived importance of e-commerce for complex products will be lowest compared to other product categories (hypothesis 4).

The likelihood of functions for producers being replaced is higher for differentiated products, architectural products, technological products, and complex products in order (hypothesis 5).

The likelihood of functions for customers being replaced is higher for differentiated products, architectural products, technological products, and complex products in order (hypothesis 6).

The likelihood of functions for both being replaced is higher for differentiated products, architectural products, technological products, and complex products in order (hypothesis 7).

The ranking of likelihood of physical roles of distributors being modified will be lowest for complex products compared to other product categories (hypothesis 8).

The population of study includes all multi-national industrial distributors in the semiconductor industry in Penang, Malaysia. It is important to mention that Penang is the seat of semi-conductor business in Malaysia and East-Asia by extension. The study's sampling frame was drawn from the list of firms obtained from the Penang Development Corporation (PDC) Directory. The list contains a total of 63 firms from different countries of origin, and each of these firms was included in the survey. The questionnaire administration procedure was either through e-mail, personal contact, or through post mail. Out of the 63 questionnaires sent out, 54 usable responses were received which translates into 85% rate. The unit of analysis was at the organizational level, and either the CEO or the deputy represented the organizations. All the firms included in this study have a website where products are exhibited. They also have portals where customers as well as producers logon to access and give information regarding products, place orders and make payments, etc. The distributors have ample experience with both on-line and off-line transactions. Thus, respondents have adequate knowledge and experience with both on-line and off-line transactions to furnish reliable information on the perceived importance of e-commerce. The responding organizations are of 22 nationalities, which were grouped according to regional blocks as follows: 7 of the organizations are Americans, 22 are Asian firms, 4 are from Africa and the Middle East, 19 are from Europe, and 2 are from Oceania (Australia to be exact).

The questionnaire was adapted from Tidd et al., (1997) and Bagozzi et al., (1998). All questions were rated using 5-point Likert-like scale. Questions relating to importance were measured from greatly decreased (point 1) to greatly increased (point 5), while those relating to likelihood of distributors functions being replaced or modified were measured from highly unlikely (point 1) to highly likely (point 5).

Nonparametric Friedman Test was employed in addition to others in this study. The Friedman test is applied to problems with the following characteristics: the problem objective is to compare two or more populations, the data are either ranked or quantitative but not normal, and the data are generated from a blocked experiment (Keller & Warrack 2000). This tool is suitable for this study and will help in comparing four categories of products listed above.

RESULTS AND DISCUSSION

The internal consistency of the measures was ascertained via reliability analysis. The Cronbach's Alpha coefficients for all dimensions show values higher than .60 except for likelihood of being replaced (for differentiated products), which is .50. As observed from Table 1, the construct measures are reliable.

In Tables 2 and 3 below, mean and standard deviation for the change in importance and the ranking for change across different products are presented.

There is perceived change in importance of distributors functions with mean values ranging from 3.44 to 3.74 across product categories. Change in importance of functions for customers, producers and for both respectively range from 3.60 to 3.74, 3.52 to 3.69, and 3.44 to 3.56 across product categories. Overall functions of distributors (a combination of functions for customers, producer, and both) are increasing in importance for all categories, with the following mean and standard deviation of change in importance: differentiated products (3.54; 0.62), architectural products (3.62; 0.58), technical products (3.59; 0.58), and complex products (3.50; 0.64). In all, the results show a perceived increase in importance of the roles of distributors in the semi-conductor industry. Across all product categories in the industry, perceived importance of e-commerce on the roles for customers is strongest, followed by functions for producers, and functions for both. Therefore, the physical distribution and logistics-related functions for customers, producers, and for both are becoming increasingly important in the e-commerce era (hypotheses 1, 2 & 3).

Table 3 shows the ranking in the perceived change in importance of e-commerce on distributor's roles using the Friedman two-way ANOVA. The results indicate that overall there is no definite ranking in the perception of change of importance measured in this study (hypothesis 4). Thus, the relevance of e-commerce to distributors functions for customers, producers, and for both is increasing in no significant order.

Table 4 presents the means and standard deviations for likelihood of distributors roles being replaced. Mean and standard deviation of likelihood of replacing overall physical distributors functions based on product category are, differentiated products (3.41; 0.59), architectural products (3.24; 0.75), technological products (3.24; 0.71), and complex products (3.09; 0.78). The results show that the likelihood of the physical distribution functions (for customers, producers, and for both) being replaced is highest for differentiated products and lowest for complex products. This result is probably accounted for by the low level of technology and market novelty of differentiated products as compared to complex products. Since market and technology co-evolve in complex product category, the physical distribution and logistics-related functions are seemingly more indispensable (relative to other product categories) as the demand for their specialized services increases.

Table 5 provides the summary of Friedman two way ANOVA and Kendall Test of Concordance's test results for likelihood of functions being replaced. There is a definite ranking across all products for the three main functions. Generally, mean rank is highest for differentiated products (2.53-2.94), followed by architectural products (2.40-2.68), technological products (2.27-2.58), and subsequently complex products (2.18-2.51) for all functions. Checking on the next level of details, results show that functions for customers, functions for producers, and functions for both have definite ranking for likelihood of being replaced. It is therefore conclusive to state that the likelihood of functions being replaced is highest for differentiated products, architectural products, technological products, and complex products in order.

The study shows that there is significant evidence at 5% level to support the validity of hypotheses 5, 6, 7 & 8. Thus;

The likelihood of functions for producers being replaced is higher for differentiated products, architectural products, technological products, and complex products in order (H5).

The likelihood of functions for customers being replaced is higher for differentiated products, architectural products, technological products, and complex products in order (H6).

The likelihood of functions for both being replaced is higher for differentiated products, architectural products, technological products, and complex products in order (H7).

The ranking of likelihood of physical roles of distributors being modified will be lowest for complex products compared to other product categories (hypothesis 8).

IMPLICATIONS OF THE STUDY

This research advances the current knowledge in this field by unveiling distributors' perceptions of the importance of e-commerce to the physical distribution and logistics-related roles. It also helps to understand the extent to which product nature affects the perceived importance of e-commerce. Moreover, the study helps to clarify the debate on the issue of intermediation and dis-intermediation of e-commerce. The findings of the research show that e-commerce is growing in importance and can potentially render some of the roles of offline intermediaries irrelevant. Some of the roles will experience more modification and others less, depending on the product typing. Specifically, complex products are less likely to experience disintermediation than the other product categories in certain functions as shown earlier, while differentiated products are more vulnerable to disintermediation. The current study supports the earlier findings of Schmitz (2000) that the effects of e-commerce on intermediation depend on the characteristics of the goods under consideration, as well as the findings of King and Kang (2000) that product complexity is positively correlated to an e-shopper's propensity to use a vehicle other than the Internet to close a transaction.

One of the managerial implications of the research is to provide distributors an idea of the functions that are likely to be replaced and which are not. For those functions that are more likely to be replaced, distributors should collaborate with producers and customers to integrate electronic options into their activities in order to achieve higher efficiency level, which will eventually benefit all parties in the supply chain. For those functions that are less likely to be replaced, distributors may continue to offer offline services and to strengthen their competitive edge and further add value to customers and producers by delivering superior value offline (Ndubisi 2003a; 2003b). Physical distributors should deliver solutions instead of just commodities, which is the only way they can retain an important place in the channel. One crucial way of doing this as mentioned shortly is to introduce some elements of online (if they have not done so) to be used in juxtaposition with existing offline functions so as to serve both customers and producers more efficiently. This will help distributors to ensure that adequate and timely supply and demand data and other relevant information are easily available to buyers and sellers at all times. The ability of distributors to provide market intelligence to producers will be considered as value added as it is difficult for producers to monitor millions of customers that buy their products. This role can be played more effectively through online tracking of shoppers' profiles and creation of databases for such information. Thus vital information about consumer buying habits, store preferences, price sensitivity, promotional penchants, brand awareness and loyalty, attitude towards electronic transactions, etc. can be generated for the benefit of both upstream and downstream partners. By creating a business home page, the distributor can also help to promote the manufacturer's products as well as provide customers with useful product information. Furthermore, distributors can also leverage e-commerce capabilities in the strategic decision to undertake demand creation activities in addition to demand fulfillment.

Further, since product complexity as shown earlier is positively associated with an e-shopper's propensity to use a vehicle other than the Internet to close a transaction, physical intermediaries may choose to exploit this opportunity created by the inability of e-commerce to begin and complete delivery of complex products or highly technical products by extension. As such, the relevance of 'brick and mortar' is not likely to be annihilated; instead they can support online activities by serving as service center, collection and redemption centers, in addition to its full offline functions. They may create a niche by providing offline services (including pre transaction, transaction, and post transaction services) in a similar manner as the Dell company, which is opening up Kiosks around the US to attend to offline services needs of its customers.

The research also holds an important lesson for producers. They should not consider the possibility of consortia-like electronic marketplace as the next business model whereby they could form strategic alliances with e-marketers to synergize the effect of their competencies in online while retaining the services of the offline distributors at the same time. This is because of possible conflicts this might raise. The shift toward direct channels has not been as easy for the major PC manufacturers who conventionally used indirect channels. IBM and Compaq, for example, have developed manufacturing and sales programs to generate some of the cost advantages of going direct without alienating their dealer networks (Wilcox 2000). These plans have not been successful thus far, because dealers have retaliated against the companies. Because of their experiments with direct selling, IBM's revenues were down 24% in the first half of 1998 while Compaq's were flat. Hewlett-Packard, which did not try to go direct, experienced a 26% sales gain (Lyons 1998). Channel conflict arose because disintermediation brings IBM, Compaq, and other manufacturers in direct competition with intermediaries.

LIMITATIONS OF THE STUDY AND FUTURE RESEARCH DIRECTION

Although the study has succeeded in achieving its primary objectives, some limitations and opportunities for additional research can be identified from this research. Firstly, this study is purely on understanding the respondents' perceptions and not based on hard data generated over time on the change in importance and likelihood of distributors' functions being modified. Future research in this area should use hard data by tracking changes in importance of e-commerce over time. Although data for such a study may be difficult to get as it will require information on the value of online and offline transactions over the period, this approach may have different implications from a perceptive approach used in the current research. The future research should be longitudinal, using actual data of change in importance and likelihood of functions being modified. This will help to ascertain if the findings based on actual data agree with findings of the current study, which is based on perceptions.

Secondly, the sampling frame of this study is limited to semiconductor industry, hence may not be applicable to other industry sectors. Future research should cover a wider industry sector for a more comprehensive and more general findings.

Lastly, albeit the setting of this study is in the Northern Malaysia, which is also the seat of semi-conductor business in Malaysia and the Pacific Rim by extension, there is potential for regional clustering bias. Future research should replicate the study in other nations and/or regions for a more generic picture of the impact of e-commerce on the physical distribution and logistics-related functions.

CONCLUSION

This study attempts to provide an understanding of the perceived importance of e-commerce on the physical distribution and logistics-related functions for customers, producers, and for both across four product categories in the semi-conductor industry in Malaysia. The findings of the study reveal that e-commerce has important impact on the roles of distributors, especially in their roles for customers. Further, findings by comparing among the four different types of products show that the likelihood of distributors' functions being replaced is lowest for complex products than for differentiated products, architectural products, and technological products. E-commerce is modifying the informational and promotional roles of distributors in all four product categories, as such pure 'brick and mortar' intermediaries who are yet to go online, may seek for strategic alliances with e-marketers to develop a viable strategy and to realign the business goals in order to compete favorably in this information technology age. Producers should not attempt to use direct (online) and indirect (offline via intermediaries) distribution methods simultaneously. This strategy will likely lead to channel conflict which tends to arise from incompatible goals. Since channel members such as manufacturers and distributors are independent businesses, each striving for profitability, growth, market share, etc., they will eventually retaliate against such a strategy, thus causing it to backfire.

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Nelson Oly Ndubisi, University of Malaysia Sabah

Table 1: Cronbach's Alpha Values

 E-commerce Importance

Role of Distributors DP AP TP CP

Functions for Customers (2 items): .88 .88 .77 .80

* Providing right attribute

* Providing right quantity

Functions for Producers (3 items): .74 .73 .73 .72

* Storing * Financing

* Information gathering

Functions for Both (6 items): .62 .73 .75 .74

* Risk reduction

* Educating customers & representing
 producers

* Safe transportation

* Timely transportation

* Promoting new products

* Promotional programs for sales force

 Likelihood of Modifying

Role of Distributors DP AP TP CP

Functions for Customers (2 items): .83 .90 .89 .80

* Providing right attribute

* Providing right quantity

Functions for Producers (3 items): .50 .80 .81 .71

* Storing * Financing

* Information gathering

Functions for Both (6 items): .65 .81 .80 .83

* Risk reduction

* Educating customers & representing
 producers

* Safe transportation

* Timely transportation

* Promoting new products

* Promotional programs for sales force

DP = Differentiated products; AP = Architectural products;
TP = Technological products CP = Complex products

Table 2: Change in Importance of Distributors' Roles

 Mean

Role of Distributors S1 S2 S3 S4

Functions for Customers 3.61 3.74 3.73 3.60
Functions for Producers 3.69 3.66 3.60 3.52
Functions for Both 3.44 3.56 3.53 3.45
Overall function 3.54 3.62 3.59 3.50

 Standard Deviation

Role of Distributors S1 S2 S3 S4

Functions for Customers 1.10 0.84 0.85 0.95
Functions for Producers 0.81 0.70 0.73 0.73
Functions for Both 0.58 0.55 0.58 0.64
Overall function 0.62 0.58 0.58 0.64

S1 = Differentiated products; S2 = Architectural products;
S3 = Technological products; S4 = Complex products

Table 3: Friedman Two Way ANOVA by Rank (Change in Importance)

 Mean Rank

Role of Distributors S1 S2 S3 S4

Functions for Customers 2.43 2.70 2.49 2.38
Functions for Producers 2.71 2.66 2.35 2.28
Functions for Both 2.25 2.68 2.59 2.48

 Test Statistics

Role of Distributors Chi-Sq. Sig. W (a)

Functions for Customers 2.679 .444 .017
Functions for Producers 5.380 .146 .033
Functions for Both 3.860 .277 .024

S1 = Differentiated products; S2 = Architectural products;
S3 = Technological products; S4 = Complex products

(a) = Kendall's Coefficient of Concordance

Table 4: Likelihood of Distributor's Roles Being Replaced

 Mean

Role of Distributors S1 S2 S3 S4

Functions for Customers 3.62 3.24 3.28 3.12
Functions for Producers 3.50 3.28 3.27 3.15
Functions for Both 3.30 3.22 3.16 3.05
Overall function 3.41 3.24 3.24 3.09

 Standard Deviation

Role of Distributors S1 S2 S3 S4

Functions for Customers 1.02 1.05 1.05 1.06
Functions for Producers 0.70 0.92 0.87 0.86
Functions for Both 0.59 0.69 0.68 0.77
Overall function 0.59 0.75 0.71 0.78

S1 = Differentiated products; S2 = Architectural products;
S3 = Technological products; S4 = Complex products

Table 5: Friedman Two Way ANOVA by Rank (Likelihood of being replaced)

 Mean Rank

Role of Distributors S1 S2 S3 S4

Functions for Customers 2.94 2.42 2.40 2.25
Functions for Producers 2.85 2.54 2.32 2.29
Functions for Both 2.80 2.68 2.27 2.26

 Test Statistics

Role of Distributors Chi-Sq. Sig. W (a)

Functions for Customers 11.544 .009 ** .071
Functions for Producers 7.359 .061 m .045
Functions for Both 8.554 .036 * .053

S1 = Differentiated products; S2 = Architectural products;
S3 = Technological products; S4 = Complex products

* p<.05 ** p<.01 m = Moderate

(a) = Kendall's Coefficient of Concordance