The Impact of Mobile Channel Introduction on Online Channel - Evidence from Korean e-marketplace
Two channel capabilities - access and search capabilities,differentiate mobile and online channels.Mobile devices are not fixed to a location, and consumers can access mobile channels wherever and whenever they want (i.e. ubiquitous access capability). In contrast, buyers' locations are fixed to places that have PC and Internet connections in online channels (i.e. constrained access capability). Therefore, mobile channels are more suitable to support time-critical activities and facilitate immediate transactions.
However, due to the small screens and low usability of mobile devices, information search through mobile channels is substantially limited (i.e. limited search capabilities), compared to online channels. Such a limitation may hamper longer and complex uses of mobile channels, possibly increasing search costs. In contrast, it is much easier for buyers to browse and find information on PC version sites (i.e. extensive search capabilities.) Therefore, online channels are more suitable for product categories where the amounts of information a consumer needs before making purchase decisions are large. Based on channel capabilities (search capabilities: High/Low, access capabilities: High/Low) and product category characteristics (time criticality: High/Low, information intensity: High/Low), we can come with a conceptual framework which predicts potential impact of m-commerce (i.e. mobile channel) introduction on e-commerce (i.e. online channel).
For products in Quadrant I (Time criticality: H, Information intensity: L), the mobile channel can provide an excellent access medium, thanks to its ubiquitous access capability. In addition, a low level of information intensity indicates that the limited search capability of the mobile channel will not impede transactions of these products. Thus, the mobile channel can be an effective substitute for the online channel. In addition, the ubiquitous access capability of the mobile channel can entail new demand. Therefore, we expect that the major impact of the mobile channel will be substitution of the online channel, thereby resulting in a reduction in online transactions. At the same time, we expect the mobile channel to generate a substantial new demand of its own.
For products in Quadrant II (Time criticality: L, Information intensity: L), each channel has its own weakness, resulting in low fit for both channels. Thus, the mobile channel is not an effective substitute for the online channel. However, the two channels can complement each other quite well: the mobile channel provides ubiquitous access capability, while the online channel provides extensive search capability. Given that consumers are likely to purchase at the moment they have enough information about the product, we believe that most of the channel synergy will be realized on the online channel, and new demand generation in the mobile channel will be minimal. Therefore, we expect the mobile channel to increase the demand on the online channel and to generate a minimal new demand of its own.
Products in Quadrant III (Time criticality: L, Information intensity: L) have a high fit with both channels. Because the mobile channel provides another effective channel in addition to the online channel, we predict that it will generate significant new demand, although this effect will be smaller than that in Quadrant I due to low time-criticality. In terms of cross-channel interactions, the mobile channel may have both substitute and complementary effects on the online channel. On the one hand, because the mobile channel can be as effective as a medium as the online channel, consumers can use the former for purchases instead of the latter. On the other hand, consumers may search for product information on their mobile devices and may purchase the product on their PC because the transaction is not time-critical, therefore triggering additional demand on the online channel. It is unclear which effective will dominate, which is an empirical question.
Finally, in Quadrant IV (Time criticality: L, Information intensity: H), products fit perfectly with the online channel. However, the mobile channel is not effective at all. Due to the low time-criticality, the ubiquitous access capability of the mobile channel would be less valued. Moreover, a high-level of information intensity indicates that an information search through the mobile channel is not likely to be sufficient in making purchase decisions. Given that the mobile channel is a poor fit for these products, we expect that the mobile channel's effect on the online channel would be minimal.
Comparison of actual transactions with baseline projections (based on transaction data of individual customers of e-commerce player before and after the introduction of mobile channel) clearly demonstrates that our predictions hold well in practice, as shown in the table below.
* Based on My paper with Yongsuk Bang, Dongjoo Lee, Kunsoo Han, Jaehyun Ahn (Forthcoming, Journal of Management Information Systems, 2013)
However, due to the small screens and low usability of mobile devices, information search through mobile channels is substantially limited (i.e. limited search capabilities), compared to online channels. Such a limitation may hamper longer and complex uses of mobile channels, possibly increasing search costs. In contrast, it is much easier for buyers to browse and find information on PC version sites (i.e. extensive search capabilities.) Therefore, online channels are more suitable for product categories where the amounts of information a consumer needs before making purchase decisions are large. Based on channel capabilities (search capabilities: High/Low, access capabilities: High/Low) and product category characteristics (time criticality: High/Low, information intensity: High/Low), we can come with a conceptual framework which predicts potential impact of m-commerce (i.e. mobile channel) introduction on e-commerce (i.e. online channel).
For products in Quadrant II (Time criticality: L, Information intensity: L), each channel has its own weakness, resulting in low fit for both channels. Thus, the mobile channel is not an effective substitute for the online channel. However, the two channels can complement each other quite well: the mobile channel provides ubiquitous access capability, while the online channel provides extensive search capability. Given that consumers are likely to purchase at the moment they have enough information about the product, we believe that most of the channel synergy will be realized on the online channel, and new demand generation in the mobile channel will be minimal. Therefore, we expect the mobile channel to increase the demand on the online channel and to generate a minimal new demand of its own.
Products in Quadrant III (Time criticality: L, Information intensity: L) have a high fit with both channels. Because the mobile channel provides another effective channel in addition to the online channel, we predict that it will generate significant new demand, although this effect will be smaller than that in Quadrant I due to low time-criticality. In terms of cross-channel interactions, the mobile channel may have both substitute and complementary effects on the online channel. On the one hand, because the mobile channel can be as effective as a medium as the online channel, consumers can use the former for purchases instead of the latter. On the other hand, consumers may search for product information on their mobile devices and may purchase the product on their PC because the transaction is not time-critical, therefore triggering additional demand on the online channel. It is unclear which effective will dominate, which is an empirical question.
Finally, in Quadrant IV (Time criticality: L, Information intensity: H), products fit perfectly with the online channel. However, the mobile channel is not effective at all. Due to the low time-criticality, the ubiquitous access capability of the mobile channel would be less valued. Moreover, a high-level of information intensity indicates that an information search through the mobile channel is not likely to be sufficient in making purchase decisions. Given that the mobile channel is a poor fit for these products, we expect that the mobile channel's effect on the online channel would be minimal.
Comparison of actual transactions with baseline projections (based on transaction data of individual customers of e-commerce player before and after the introduction of mobile channel) clearly demonstrates that our predictions hold well in practice, as shown in the table below.
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