Int. J. Electronic Business, Vol. 7, No.

5, 2009 445

Effective e-commerce strategies for small online

retailers

Patrick J.S. Tan, Ravi S. Sharma*

and Yin-Leng Theng
Wee Kim Wee School of Communication and Information,
Nanyang Technological University,
31 Nanyang Link, Singapore 637718, Singapore
Fax: +65-6791 5214
E-mail: patrick.tan@pmail.ntu.edu.sg
E-mail: rsharma@pmail.ntu.edu.sg
E-mail: tyltheng@ntu.edu.sg
*Corresponding author

Abstract: There is little information available to help small businesses exploit

the internet. This study attempts to plug the research gap by examining the
influences of strategic decisions made by top management on the adoption of
critical success factors. Based on the research results, it proposes a strategic
e-commerce management model to help small online retailers make a
better-informed decision on how to deploy their resources to build a successful
business online.

Keywords: e-commerce strategies; critical success factors; e-commerce

management; SMEs; small and medium-sized enterprises; online retailing;
strategic e-commerce management.

Reference to this paper should be made as follows: Tan, P.J.S., Sharma, R.S.
and Theng, Y.L. (2009) Effective e-commerce strategies for small online
retailers, Int. J. Electronic Business, Vol. 7, No. 5, pp.445472.

Biographical notes: Patrick J.S. Tan has just graduated with a MSc Degree in
Information Systems from Nanyang Technological University. He holds a
BSc Degree in Business Administration and an MBA in Finance from
Hawaii Pacific University. He is the former e-Business Manager of a leading
department store in Singapore. His self-published book, Success with Online
Retailing for Small Businesses, won the ForeWord Magazines Book of the
Year 2003 Finalist award. He believes the existing global distribution channels
are not optimised to support global e-commerce and seeks opportunities to
pursue his research interests in global e-commerce, e-supply chain and order
fulfilment systems.

Ravi S. Sharma is an Associate Professor at the Wee Kim Wee School

of Communication and Information at the Nanyang Technological University.
Ravi had spent the previous ten years in industry as a Principal at IBM Global
Services and Director of the Multimedia Competency Centre of Deutsche
Telekom Asia. His teaching, consulting and research interests are in multimedia
applications, services and strategies. He received his PhD in Engineering from
the University of Waterloo (Canada) and is a Chartered Engineer (UK) and a
Senior Member of the IEEE.

Copyright 2009 Inderscience Enterprises Ltd.

Electronic copy available at: http://ssrn.com/abstract=1471227

446 P.J.S. Tan et al.

Yin-Leng Theng is an Associate Professor and Associate Chair of Research

at the Wee Kim Wee School of Communication and Information in
Nanyang Technological University (NTU). She teaches on the Information
Studies/Systems Masters Programmes: Digital Libraries, Human-Computer
Interaction, Usability Engineering and Information Architecture. She has also
participated in varying capacities as principal investigator, co-investigator
and collaborator in numerous research projects in the UK and Singapore
since 1998. These projects involve usable and useful interfaces for hypertext
systems, the Web and mobile environments; e-learning building tools and
learning objects; usability evaluation techniques; and geospatial digital
libraries.

1 Introduction

After years of strong double-digit growth, online retail sales in the USA are showing
signs of slowing down. In the first half of the years from 2001 to 2006, online retail sales
growth rates fell from 35.1% to 24.2%. Over the corresponding period, total retail sales
growth rates had climbed steadily from 2.4% to 7.4%. While the strong Christmas sales
in 2006 indicated otherwise, an eMarketer (2007b) report warned that US online retail
sales would plateau at 1015% of total US retail sales in the next decade, barring a
dramatic spending shift among buyers.
Maturing of the e-commerce industry can happen very fast (Feindt et al., 2002).
Notwithstanding when market maturity will set in, it is important that e-commerce
companies prepare themselves for the increasingly competitive pressures from more
demanding consumers, experienced e-commerce players, traditional brick-and-mortar
retailers and new entrants attracted to the growing online retailing market.
Online retailers should understand the best practices of successful e-commerce ventures
and get things done right fast. This issue is much more critical for small businesses,
the majority of which are involved in online selling (Pratt, 2002). Unlike the large
e-commerce companies, Small and Medium-sized Enterprises (SMEs) have limited
access to slack resources to experiment with new strategies and absorb the risk of failures
(Karagozoglu and Lindell, 2004).
However, there is little known information available to help small businesses exploit
the internet. Most studies over-simplified the market structures that had emerged in the
internet economy by treating e-commerce companies as a generic group. The internet
market space can be divided into three broad structures: portals, market makers and
product/service providers, each of which is further divided into Business-to-Consumer
(B2C) and Business-to-Business (B2B) segments. Players in the three market structures
serve different purposes, offer different values to their business partners and customers,
generate different revenue streams, exhibit different demand and purchasing
characteristics, and undergo different types of decision processes (Mahadevan, 2000;
Kotler, 1986). Consequently, critical success factors that are important to e-commerce
companies in general may not necessarily be relevant to online retailers. Similarly,
factors that are important to large e-commerce companies may not be applicable to
small businesses, which face considerable operational and financial constraints in
embracing e-commerce (Taylor and Murphy, 2004). Developed by Rokart (1997) to
help executives define their information needs, the critical success factor is defined as

Electronic copy available at: http://ssrn.com/abstract=1471227

 Effective e-commerce strategies for small online retailers 447

an important aspect of a business, which when implemented satisfactorily, will ensure

competitive performance for the organisation (Feindt et al., 2002).
To ensure that definitive conclusions could be drawn from the surveys results, this
research focused its studies on small online retailers (B2C product/service providers).
Medium-sized enterprises employing less than 200 employees, which are likely to
experience constraints common to small businesses, were included in the study to enlarge
the pool of suitable respondents. This study acknowledges the limitations of previous
studies (for example, Taylor and Murphy, 2004) that suggested a one-size-fits-all
policy for SMEs, and attempts to account for the sectors diversity by examining the
influences of an online retailers competitive profile on the adoption of critical success
factors to achieve desired business objectives.
The term, competitive profile, is used to refer to the strategic decisions made by
top management that define the characteristics of a business pertaining to product
classification, growth strategy, competitive focus, phase of growth and channel strategy.
Findings from this research will help small online retailers to make a better decision on
how to allocate their limited resources to e-commerce operations that are more likely to
deliver the desired business performance. Hopefully, their successes will inspire more
small business owners to venture into e-commerce. The potential economic benefits are
significant given the strategic roles of SMEs in global economies at both micro and
macro levels (Rao et al., 2003).

2 Literature review

2.1 Critical success factors

Most studies on critical success factors in e-commerce focused on a narrow aspect of the
e-business operations. For example, both Lee and Kozar (2006) and Cao et al. (2005)
identified the factors that constituted website quality using a popular IS success model
and investigated their effects on e-commerce success and customers beliefs, attitudes
and intentions respectively.
Sungs (2006) research is an exception. From extensive literature review,
Sung identified 16 factors and e-commerce managers from large enterprises in Korea,
Japan and the USA were asked to evaluate the importance of each factor to e-commerce
success, using a five-point Likert scale (Table 1). However, Sung effectively excluded
SMEs from the above research since most SMEs could not provide accurate information
regarding Tobins q (a measurement of a companys market value over its replacement
costs) and Returns On Assets (ROA employed). The bias on large enterprises probably
explains why different aspects of IT infrastructure such as systems stability, security and
speed were identified as top critical factors in the study.
On the contrary, a qualitative research (Feindt et al., 2002) on 17 baby gazelles,
which are innovative small enterprises with high growth potential, suggested that
e-commerce is more about strategy than about technology. The baby gazelles were
asked to identify the set of factors that were critical to meeting their objectives from a list
compiled from initial literature review. Technology, while important to facilitate the
successful implementation of e-commerce operations, was excluded as critical success
factors because few small businesses would want to build and manage the IT
infrastructure themselves (Feindt et al., 2002; Jeffcoate et al., 2002).
448 P.J.S. Tan et al.

Table 1 Comparison of critical success factors for large and small e-commerce ventures

No. Factors for SMEs (Feindt et al., 2002) Factors for large enterprises (Sung, 2006)
1 Competitive profile E-commerce strategy
2 Commitment E-commerce expertise
3 Content Variety of goods/services
Plenty of information
4 Convenience Ease of use
5 Control Delivery of goods/services
Payment process
6 Interaction Customer services
Customer privacy
7 Community Customer relationship
8 Price sensitivity Competitive pricing
9 Brand Image No comparable factor
10 Partnership No comparable factor
11 Process improvement Evaluation of EC operations
12 Integration Low-cost operation
13 Facilitators System stability
System security
System speed

For the purpose of this research, we adopted Feindt et al.s list of 11 critical success
factors, based on the understanding that they roughly matched the robustness and
completeness of Sungs 16 factors, which were compiled from an extensive review
of 30 research papers (Table 1). E-commerce strategy was treated as an integral part
of the competitive profile while system stability, system security and system speed were
considered as just facilitators to implement e-commerce operations. We shall explore
each of these elements in the following sections.
Commitment. Many studies (Pratt, 2002; Rao et al., 2003; Feindt et al., 2002; Poon and
Swatman 1999; Taylor and Murphy, 2004) identified owners commitment to grow his
business and capabilities as a very important determinant of e-commerce success.
The growth motivation of business owners can be observed from their readiness to adapt
to market changes and reinvent their business strategies continuously. They must be open
and flexible to new ideas, technologies and business opportunities. When necessary,
the owners are prepared to seek strategic partners and venture capitalists to provide the
appropriate technology, funding, management expertise and contacts to grow their
businesses rapidly (Feindt et al., 2002).
Content. The website serves as a focal point for gathering and disseminating information
related to the marketing, sales and other functions of the organisation (Rao et al., 2003).
Web content must be accurate, informative, updated, easy-to-understand and relevant to
users needs (Lee and Kozar, 2006; Cao et al., 2005; Feindt et al., 2002). In addition,
online retailers must offer a suitable range of products, provide accurate and relevant
 Effective e-commerce strategies for small online retailers 449

product information and make it easier for customers to compare prices with other
competitors with the help of other service providers when necessary (Feindt et al., 2002).
Convenience. Convenience factor, synonymous with usability, refers to the development
of user-friendly interfaces and designs on websites (Rao et al., 2003). E-merchants can
deploy navigation tools such as menu, directory, site map and search engines, multimedia
capabilities such as audio/video clips, animation and games, and customisation
capabilities such as zoom capabilities, product configuration tools and item comparison
engines to demonstrate a product or service, improve communication and enhance the
shopping experience (Cao et al., 2005; BizRate, 2006). However, web designers
must strike a balance between an attractive design and fast loading time because
system response time was inversely related to user satisfaction (Cao et al., 2005).
Interaction. Consumers expect high quality interaction with online retailers, particularly
in the areas of prompt and responsive customer services, round-the-clock help line and
real-time chat, in-house mailing lists and loyalty programmes, high ethical standards in
enforcing customer privacy, security measures and refund policy, and an effective system
to make every step of the order fulfilment process transparent to the customers.
Performing well on these activities has proven to be very effective in earning consumers
trust and loyalty (Liao and Cheong, 2001; Feindt et al., 2002; Lee and Kozar, 2006;
Cao et al., 2005).
Control. Control factor evaluates the systems that the online retailer has put in place to
track and respond to customers queries, handle complaints, feedback and product
returns, control the entire order fulfilment process, update Web content, process online
transactions and control credit risks (Rao et al., 2003; Kearney, 2003). Online retailers
must conduct operational audits regularly to measure and correct any lapses in customers
expectation and perception of service quality for key business processes and services
provided by third-party vendors. SERVQUAL is a well-known instrument for this
purpose. It measures the e-merchants reliability, responsiveness and empathy in
delivering the services to meet customers needs (Lee and Kozar, 2006; Feindt et al.,
2002).
Community. The community factor emphasises the interactions among like-minded
people and organisations in online communities that allow participants to exchange
relevant information, products and services with one another through applications such as
forums, blogs, peer-to-peer auctions and independent product reviews. A vibrant online
community offers many opportunities for the e-merchant to increase sales and
profitability (Feindt et al., 2002; Rao et al., 2003). The online activities can also be
extended to the real world where e-merchants organise recreational activities for their
customers in collaboration with other like-minded organisations.
Price sensitivity. Customers tend to expect lower prices on the web (Feindt et al., 2002).
After factoring in the shipping and handling charges, the same product cannot sell for
significantly higher prices than traditional stores, especially in a physically concentrated
and competitive market environment (Liao and Cheong, 2001; Rao et al., 2003).
A shop.org study (BizRate, 2006) showed that the competitive environment had forced
e-merchants to accept free or discounted shipping as a cost of doing business online,
yet most merchants experienced an improvement in overall profit margins.
To compete effectively, online retailers may consider charging premiums on specialised
450 P.J.S. Tan et al.

services or selling products that are not widely available locally (Feindt et al., 2002;
Lee and Kozar, 2006).
Brand image. On the Web, the next shop is just a click away and the customer base is
bounded only by the language used on-site and the geographical regions where orders can
be shipped economically. Building a distinctive brand name is essential for an e-merchant
to compete effectively with other online sellers (Feindt et al., 2002). Ries and Trout
(1993) aptly defined the brand name as the hook that hung a business on the prospects
minds. The success hinges on how well a business define its mental position in terms of
perceived benefits that fulfil the consumers needs better than its competitors. Economists
have found that customers were prepared to pay more to retailers with a high reputation
or favourable brand image (Lee and Kozar, 2006).
Partnership. Partnership is particularly important to small businesses because resource
scarcity compels them to work closely with customers, suppliers and business partners to
leverage brand awareness, improve marketing effectiveness, launch customised products,
take advantage of new market opportunities and streamline their operations (Poon, 2000;
Feindt et al., 2002; Jeffcoate et al., 2000). It may be worthwhile for small businesses to
consider joining a business community because the membership may lead to new
business and potential partnerships (Jeffcoate et al., 2000).
Process improvement. Business Process Re-engineering (BPR) uses information
technology to change and automate organisational processes in order to achieve greater
operational efficiency and e-commerce readiness to cope with rapid growth in transaction
volume (Rao et al., 2003; Jeffcoate et al., 2000). This approach is widely practiced in
large enterprises. Among SMEs, financial constraints restrict re-engineering work to a
lower level and narrower scope although studies showed that SMEs could benefit
equally from BPR because business processes are at the heart of e-commerce (Jeffcoate
et al., 2000). Content management and integration of cross-channel operations are typical
processes that offer great scopes for re-engineering (Rao et al., 2003; BCG, 2001;
Lee and Kozar, 2006; Feindt et al., 2002).
Integration. Integrated Electronic Data Interchange (EDI) systems could deliver the
ultimate service quality, performance and productivity capable of supporting high volume
business (Feindt et al., 2002). Many small enterprises do not have the necessary technical
expertise and resources to seek full enterprise integration unless they have support
from technologically advanced partners (Rao et al., 2003; Jeffcoate et al., 2000).
A three-staged model is proposed for small businesses, in which integration starts with
inter-organisational systems, followed by selected local integration and, finally,
full integration of external and internal systems (Jeffcoate et al., 2000).

2.2 Competitive profile

Feindt et al. (2002) and Jeffcoate et al. (2002) acknowledged the diversity of small
businesses, and adopted a system to classify the critical success factors implemented at
different phases of growth for companies pursuing differentiation and cost-focus
strategies. Karagozoglu and Lindell (2004) explored empirically the relationship between
competitive strategy and e-commerce operations, but the study was limited to a partial
analysis of a handful of factors such as website usability (convenience), content, order
fulfilment (control) and e-supply chain (integration). Sung (2006) totally ignored the
 Effective e-commerce strategies for small online retailers 451

diversity of e-commerce companies and considered e-commerce strategy as one of the

critical success factors. There is a lack of empirical studies that examine the effects of
competitive profile on e-commerce operations and business performance.
Growth strategy. Feindt et al. (2002) noted that the sample obtained from KITE, an EU
project undertaken to collect and analyse the diversity of e-commerce practiced by SMEs,
was classified into four categories based on the SMEs growth strategy: gazelles are
medium-sized enterprises (100499 employees) that have generated more than 20%
compound sales growth each year over the past five years; baby gazelles are small-sized
innovative enterprises (549 employees) that have the greatest potential and motivation
to become gazelles; mice are small-sized enterprises (599 employees) that have little or
no interest in growing into a large company; and gophers are enterprising small
businesses (599 employees) that value quality of life more than growth.
Competitive focus. Based on Porters competitive model (Cravens, 1987), Feindt et al.
(2002) identified three competitive strategies from the KITE inventory of 150 small and
medium-sized e-commerce ventures: most small e-commerce ventures start out in a niche
market by offering differentiated products or services (differentiation focus); they may
move into the broad mass market by offering product or market specialisation as they
expand their businesses (differentiation strategy); or move into some niche markets
where they enjoy a cost advantage and compete on prices (cost focus).
Phase of growth. The development of an e-commerce business essentially goes through
three phases of growth start-up, growth and maturity. All small businesses start out in a
niche market through differentiation or cost advantage and adopt strategies to grow their
customer bases rapidly. From this position, they can search for growth opportunities
through increasing sales to existing customers, branching out into new market segment
and offering new products or services to existing customers. Those that perform well may
move on to a high-volume maturity phase and initiate process re-engineering and
integration to support high-volume sales. They also expand their operations by starting or
acquiring new businesses that complement their existing businesses (Kotler, 1986;
Feindt et al., 2002; Jeffcoate et al., 2002).
Product classification. Researchers have stressed the need to study the effect of industry
sectors and product characteristics on e-commerce adoption, noting that consumer goods
that relied heavily on touch-and-feel senses were less likely to sell easily on the internet
(Lee and Kozar, 2006; Liao and Cheong, 2001; Poon and Swatman, 1999). This research
adopted the classification used by marketers to classify consumer goods into four
categories based on the consumers shopping habits, namely convenience, shopping,
specialty and unsought goods (Kotler, 1986).
Channel strategy. There is another competitive dimension that was often neglected in
existing literature. Most studies treated e-commerce as a presumed extension of the
brick-and-mortar SME retailers and ignored other modes of online retailers. However,
a study commissioned by shop.org in 2001 noted that complementing an online business
with catalogue-based or mail order operations might derive higher economies of scale in
operations, improve shopping experience with seamless cross-channel marketing and
services, and provide better profitability than store-based e-merchant and pure play
e-merchant (BCG, 2001).
452 P.J.S. Tan et al.

2.3 Facilitators: IT infrastructure

Studies that focused on large or public-listed e-commerce ventures had identified system
stability, system security and system speed as very important factors for e-commerce
success (Sung, 2006). Interestingly, researches on small businesses viewed technology as
only a conduit to implement the e-commerce operations (Chappell and Feindt, 1999).
While it may be practical for large corporations with thousands of employees to own and
self-operate the entire IT systems, hosted IT infrastructure is a competitively better and
more economical alternative for small businesses because it offers many benefits such as
low setup and maintenance costs, carrier-grade data centre, round-the-clock professional
support service, data backup, uncapped bandwidth, regular software and hardware
upgrades, flexibility to scale operations rapidly to meet sudden surges in demand for
services and low risk of service failure (Suby, 2006).

3 Research methodology

3.1 Concept framework

Previous studies (for example; Karagozoglu and Lindell, 2004; Feindt et al., 2002) had
suggested that the critical success factors or e-commerce practices adopted by
e-merchants were strongly influenced by their competitive strategy and phase of growth.
However, there is a lack of comprehensive empirical studies on this topic. This research
aims to plug the above research gap identified by empirically exploring the effects of
competitive profile on the adoption of critical success factors. To facilitate the analyses,
the survey sample must be divided into different groups using grouping variables derived
from a business competitive profile:
Growth strategy: Gazelle, Baby Gazelle, Mouse and Gopher
Competitive focus: Differentiation Focus, Differentiation Mass, Cost Focus
and Hybrid
Channel strategy: Pure-play, Catalogue-based, Store-based and Integrated
Phase of growth: Start-up, Growth and Maturity
Product classification: Convenience, Shopping, Specialty and Unsought goods.
Figure 1 illustrates the framework used to relate the competitive profile to the adoption
of effective critical success factors. Competitive profile is depicted as the determinant
that exercises strong influences on the optimal choice of effective factors to be adopted.
This research will derive the strategic e-commerce management model by empirically
examining the choice of critical success factors adopted by online retailers with different
competitive profiles.
IT infrastructure is not included in the figure because we accept the proposition that
technology is just an important conduit or facilitator to implement the e-commerce
operations (Chappell and Feindt, 1999). Few companies, particularly small enterprises,
want to build and manage the IT infrastructure themselves (Feindt et al., 2002).
This research assumes that most SMEs would outsource their IT infrastructure to
professional web hosts in a strategic move to gain significant improvements in their
 Effective e-commerce strategies for small online retailers 453

competitiveness and business performances. Consequently, IT infrastructure shall have

no effect on the optimal adoption of critical success factors.

Figure 1 Concept framework relating competitive profile to the adoption of critical success
factors

3.2 Survey instrument

The questionnaire was the main survey instrument employed in this research, and it had
two sections. In Section A, respondents were asked to provide the following business
information:
1 Name 6 Growth strategy
2 E-mail Address 7 Competitive focus
3 Stores URL 8 Phase of growth
4 Product classification 9 Channel strategy
5 Number of employees 10 Number of years in e-commerce

Items 1, 2, 3, 5 and 10 were used for verification purposes to ensure that the respondent
had gone through two years of e-commerce operations and employed less than
200 employees. Items 4, 6, 7, 8 and 9 were used to determine the competitive profile of
the respondent. Defining the product classification as convenience, shopping, specialty
and unsought goods based on consumers shopping behaviours was a bit tricky and
susceptible to error in personal judgement. A visit to the online shop was necessary to
ascertain the proper product classification.
Section B contained 58 questions related to the current e-commerce practices adopted
by online retailers under each of the critical success factors. The questions were drawn
from literature review. Respondents were asked to rate the frequency of implementing
each e-commerce practice on a five-point Likert scale never, seldom, sometimes,
often and always. This research assumed that measuring the frequency of implementing a
specific e-commerce operation would address the problem encountered in previous
studies where ratings based on the importance of each business practice did not
accurately reflect its contributions to business performance (Sung, 2006). What is
important may not always receive an equitable amount of efforts because of the
operational constraints induced by a lack of technical expertise or resources.
454 P.J.S. Tan et al.

In this respect, we feel that frequency rating is a better measurement of the amount of
efforts expended on each e-commerce practice.
The arbitrary rule of ten suggests that there should be at least ten cases for each item
in the survey instrument being used. With 58 questions, this research needs 580 cases
to facilitate the use of parametric procedures such as analysis of variance and regression
analysis (Garson, 2008). That is a difficult target, but limiting the number of factors
and aspects of competitive profile to be studied in this research would not produce
useful results that could answer our research question. Consequently, this research
uses non-parametric procedures such as the Kruskal-Wallis test to perform data
analyses when normality of the data could not be verified due to small sample size
(Elliott and Woodward, 2006).

3.3 Data collection methodology

This research adopted a two-staged data collection methodology. In the first stage,
a panel of five e-commerce professionals and academics were invited to evaluate the
questionnaire and suggest improvements to be made to the questions on e-commerce
practices. The Delphi technique (Schwalbe, 2005) was adopted to prevent negative group
effects and enable suitable panellists from other countries to be included in the study.
Some questions were rephrased to remove ambiguities. A new option, the hybrid model,
was added to competitive focus because some retailers adopt differentiation strategy
on some product lines while competing on price for other products. The refined
questionnaire was then used for the second stage of empirical assessment. A web-based
survey application (see http://ntu.clickitpro.com) was created to administer the
questionnaire to small online retailers in the USA.

3.4 Survey sample

Since the survey was conducted online, it was technically possible to administer the
survey to respondents in other regions such as Europe, Australia and Asia. However,
it was noted that different strategies have to be formulated for business operations in
different countries to accommodate the differences in cultural backgrounds and market
environments (Sung, 2006).
Consequently, the USA was selected as the sample frame for this research because it
is the worlds most established e-commerce market. Insights learned from e-merchants in
the USA could serve as valuable lessons for others to follow, subject to some minor
adjustments. Attempts to seek the support of some official and commercial organisations
in the USA to help administer the survey to their members failed and the research had to
settle for a mailing list purchased from a mailing list operator. After weeding out
duplicates and e-mail addresses from unsuitable candidates and excluding bounced and
invalid e-mail addresses, the mailing list was cut down from 120,000 to approximately
20,000 e-mail addresses of business executives from approximately 13,000 businesses
in the USA.
 Effective e-commerce strategies for small online retailers 455

Companies employing more than 200 employees and start-ups with less than two
years involvement in e-commerce were disqualified from participating in the survey to
ensure that definitive conclusions could be drawn from the results. More than 75% of the
e-commerce start-ups fail within the first two years (Lee and Kozar, 2006). Those that
survive the initial two years must have done something right and their inputs to this
research would contribute valuable insights into the best practices for e-commerce.
In addition, multi-channel operators were required to provide separate financial data for
the e-commerce unit.
Despite sending out invitations to the mailing list three times over a two-month
period, there were only 55 suitable responses. We have no control over the quality of the
mailing list because it was purchased from an online list operator. The poor response rate
could be attributed to the fact that the bulk of the prospects in the mailing list could not
satisfy our selection criteria. The mailing list also contained incorrect data. Many
prospects were not retailers, while others were large enterprises employing thousands of
employees or businesses that maintain a website simply for disseminating corporate
information. Consequently, it is meaningless to discuss the response rate without
knowing the actual number of qualified prospects in the mailing list.

3.5 Measures
Sung (2006) used the average scores of the corresponding variables under each factor for
statistical analyses and found that some factors in the regression analysis showed
negative correlation coefficients as a result of multi-collinearity. Low t-ratios in the
regression analysis also suggested that too many factors were being included in the study
(Sung, 2006). Collinearity occurs when independent variables are themselves highly
correlated or when one independent variable is nearly a linear combination of two or
more independent variables (Elliott and Woodward, 2006).
Principal component analysis can effectively rectify the multi-collinearity problem.
This research attempted to use principal component analysis to uncover the underlying
structure of the large set of 58 variables and replace the critical success factors with an
optimal set of mutually uncorrelated components. The -priori assumption is that any
variable under the critical success factors may be associated with any of the mutually
uncorrelated components (Darlington, 2004; Garson, 2008). Errors occurred during the
analysis because the sample size was too small. Consequently, this research retained the
original set of critical success factors and used the mean scores of each critical success
factor for subsequent analyses.
Nevertheless, the correlation matrix for the critical success factors looks good, except
for slight collinearity between Content (CT) and Interaction (IR) factors (Table 2).
The number of factors included in this research had been reduced from 16 to 11 by
merging some of the factors from Sungs (2006) research. This, together with detailed
analysis of existing literature to compile suitable e-commerce practices commonly
adopted by e-merchants under each factor, had succeeded in removing most of the
multi-collinearity problems.
456 P.J.S. Tan et al.

Table 2 Pearson correlation matrix check for multi-collinearity

CM CT CV IR CL CY PS BI PA PI SI
CM 1.000
CT 0.540 1.000
CV 0.191 0.494 1.000
IR 0.422 0.628 0.299 1.000
CL 0.137 0.339 0.478 0.454 1.000
CY 0.494 0.350 0.464 0.359 0.361 1.000
PS 0.192 0.182 0.175 0.219 0.087 0.310 1.000
BI 0.286 0.251 0.261 0.254 0.187 0.336 0.233 1.000
PA 0.207 0.269 0.471 0.159 0.470 0.510 0.236 0.179 1.000
PI 0.220 0.420 0.549 0.334 0.388 0.462 0.243 0.319 0.423 1.000
SI 0.227 0.356 0.554 0.394 0.537 0.432 0.167 0.273 0.435 0.378 1.000
CM: Commitment; CT: Content; CV: Convenience; IR: Interaction; CL: Control;
CY: Community; PS: Price Sensitivity; BI: Brand Image; PA: Partnership;
PI: Process Improvement; SI: Integration.

3.6 Reliability and normality tests

Cronbachs alpha was used to test the reliability of measuring each critical success factor
with the average score of the corresponding variables under that particular factor.
It measures the correlation between the inter-item scores and the mean score of the factor.
The results of the reliability test on the factors are shown in Table 3. There is no absolute
standard for interpreting Cronbachs alpha, although Nunally (1978) argued that a value
of 0.7 or above was sufficient for exploratory study. Four factors, namely commitment,
interaction, price sensitivity and partnership, had alpha values less than 0.7, indicating
that the inter-item scores within these factors had relatively lower correlation.

Table 3 Descriptive statistics of critical success factors

Factors n_items N Mean S.D. Shapiro-Wilk Cronbachs

Commitment 5 55 3.603 0.544 0.166 0.638
Content 6 55 2.912 0.814 0.068 0.797
Convenience 5 55 2.831 0.816 0.475 0.802
Interaction 6 55 3.731 0.632 0.002 0.697
Control 5 55 3.261 0.921 0.465 0.795
Community 5 55 2.345 0.781 0.202 0.751
Price sensitivity 5 55 2.767 0.672 0.120 0.587
Brand Image 5 55 3.483 0.740 0.206 0.763
Partnership 5 55 2.377 0.695 0.341 0.533
Process improvement 6 55 2.663 0.814 0.150 0.734
Integration 5 55 2.791 1.133 0.099 0.878
 Effective e-commerce strategies for small online retailers 457

Parametric procedure, such as analysis of variance, requires the data to be normally

distributed. Aware of the limitations of the small sample size, this research used the
Shapiro-Wilk test to verify whether there was presence of normal distribution in the
research variables. Generally, p-values of 0.05 or 0.01 are considered small enough to
declare the absence of normality in the data. The Shapiro-Wilk p-values for the critical
success factors are shown in column 6 of Table 3. One of the factors, Interaction,
failed the normality test.
Consequently, this research decided to use nonparametric Kruskal-Wallis test to
explore the effects of competitive profile on the adoption of critical success factors.
This procedure does not require the data to meet the normality and equal variance
assumptions, and it can work with small sample size. It uses ordered or ranked values to
get around the normality limitation of the raw data. Essentially, the smallest value
receives a rank of 1, the next smallest a rank of 2, and so on (Elliott and Woodward,
2006; Wilkinson, 2007). The use of ranked value may somewhat minimise the limitations
of using the mean scores of the corresponding variables to measure each critical
success factor.

4 Results and discussions

4.1 Interaction effects

To explore the effects of competitive profile, the survey sample was divided into groups
using grouping variables derived from product classification, growth strategy,
competitive focus, phase of growth and channel strategy. For example, the survey sample
was divided into three groups, convenience, shopping and specialty, by using the product
classification as a grouping variable. Measuring the groups effects on research variables
separately may contribute to errors because of the effects of interaction among the groups
(Elliott and Woodward, 2006).
For example, if male and female hourly employees have the same average salaries,
but male salaried employees earn $35,000 more a year than their female counterparts,
then this behaviour is known as interaction between gender and job types. Consequently,
the effect of gender on salary must be considered with each job type separately and
vice-versa (Elliott and Woodward, 2006).
Groups created by different grouping variables are summarised in a matrix of
two-way cross-tabulation in Table 4. The interaction effect between two clusters of
groups can be detected with Pearson chi-square test. This test returns the chi-square score
together with a corresponding p-value. If the p value is smaller than 0.05, the
no interaction null hypothesis is rejected (Elliott and Woodward, 2006; Bowman and
Shetty, 2007).
A significant interaction effect was discovered among the groups created by
parameters from product classification and competitive focus, as well as those derived
from channel strategy and product classification, with corresponding p-values of 0.012
and 0.006, respectively (Table 4: cells with interaction effect denoted in bold italic).
The interacting groups were combined together as product-focus and product-channel
grouping variables for subsequent analyses.
458 P.J.S. Tan et al.

Table 4 Matrix of two-way cross-tabulation of group clusters

Grouping variables Product Growth Focus Phase Channel

Product Pearson Chi-square 3.249 16.444 8.641 17.999
df 6.000 6.000 4.000 6.000
p-value 0.777 0.012 0.071 0.006
Growth Pearson Chi-square 3.249 13.552 7.926 8.163
df 6.000 9.000 6.000 9.000
p-value 0.777 0.139 0.244 0.518
Focus Pearson Chi-square 16.444 13.552 5.536 5.402
df 6.000 9.000 6.000 9.000
p-value 0.012 0.139 0.477 0.798
Phase Pearson Chi-square 8.641 7.926 5.536 6.306
df 4.000 6.000 6.000 6.000
p-value 0.071 0.244 0.477 0.390
Channel Pearson Chi-square 17.999 8.163 5.402 6.306
df 6.000 9.000 9.000 6.000
p-value 0.006 0.518 0.798 0.390

Due to the small sample size, many of the cells in the two-way cross-tabulation of groups
were sparse, with less than five subjects (Tables 5 and 6). This shortcoming might
contribute to possible errors in the significance tests (Bowman and Shetty, 2007).
The sparse cells were merged together to form larger groups. The resulting groups under
the combined grouping variables are listed in Table 7, which also presents the number of
subjects in each group.

Table 5 Cross-tabulation of groups derived from product classification and competitive focus

Cost Differentiation Differentiation Hybrid

focus focus mass model Total
Convenience 1 (a) 7 (a) 1 (a) 1 (a) 10
Shopping 0 5 (b) 5 (b) 7 17
Specialty 4 (c) 18 0 6 (c) 28
Total 5 30 6 14 55
(a), (b) and (c) denote cells combined to form convenience group,
shopping-differentiation group and specialty-others group, respectively.

Table 6 Cross-tabulation of groups derived from channel strategy and product classification

Pure Catalogue Store Integrated Total

Convenience 1 (a) 0 9 (a) 0 10
Shopping 3 (b) 0 11 (b) 3 (b) 17
Specialty 8 2 (c) 6 (c) 12 28
Total 12 2 26 15 55
(a), (b) and (c) denote cells combined to form convenience group, shopping group and
specialty-cross group, respectively.
 Effective e-commerce strategies for small online retailers 459

Table 7 Frequency distribution of groups created by new grouping variables

Groups No. of subjects

Growth strategy Baby gazelle 26
Gazelle 12
Gopher 13
Mouse 4
Phase of growth Start-up 16
Growth 34
Maturity 5
Product-focus Convenience 10
Shopping-differentiation 10
Shopping-hybrid 7
Specialty-cost 10
Specialty-differentiation 18
Product-channel Convenience 10
Shopping 17
Specialty-pure 8
Specialty-cross 8
Specialty-integrated 12

4.2 Effects of competitive profile

To prepare the data for studying the effects of competitive profile, the survey sample was
divided into groups using grouping variables derived from growth strategy, phase of
growth, combinations of product classification and competitive focus, and combinations
of product classification and channel strategy.
The following example shows how the Kruskal-Wallis test was used to test
for differences in the frequency of implementing content factor among the four
groups baby gazelles, gazelles, gophers and mice identified by growth strategy.
Ho: There is no difference in the frequency of implementing content factor among
the groups.
Ha: There are differences in the frequency of implementing content factor among
the groups.
The Kruskal-Wallis test was performed on the ranking assigned to the mean content
scores of all 55 cases in the sample, on the basis that the smallest value in the list was
assigned rank one and the highest value rank 55. The outputs of this analysis are shown
in Tables 8 and 9.
The test indicates that there is a statistically significant difference in the frequency
distribution of implementing the content factor among the groups, where 2(3) = 8.257
has a corresponding p-value of 0.041. As shown in Table 9, baby gazelles have the
second highest mean rank of 28.81, while gazelles have the highest mean rank of 37.33.
The number next to the mean rank indicates the groups sample size. What this means is
that growth-oriented companies such as gazelles and baby gazelles generally deploy more
resources to enrich the contents on their sites more frequently than other counterparts.
460 P.J.S. Tan et al.

Table 8 Summary of Kruskal-Wallis test statistics

Grouping variable
Growth strategy Phase of growth Product-focus Product-channel
Factors Chi-sq p-val Chi-sq p-val Chi-sq p-val Chi-sq p-val
Commitment CM 7.248 0.064 3.067 0.216 4.503 0.342 1.357 0.852
Content CT 8.257 0.041 0.220 0.896 7.484 0.112 3.853 0.426
Convenience CV 3.582 0.310 0.520 0.771 4.535 0.338 4.819 0.306
Interaction IR 2.519 0.472 0.271 0.873 0.420 0.981 0.574 0.966
Control CL 6.865 0.076 0.681 0.711 4.049 0.399 2.646 0.619
Community CY 2.096 0.553 0.496 0.780 9.427 0.051 3.327 0.505
Pricing PS 0.795 0.851 2.436 0.296 8.513 0.075 1.671 0.796
Brand Image BI 1.832 0.608 0.779 0.677 1.795 0.773 1.641 0.801
Partnership PA 9.796 0.020 0.795 0.672 6.674 0.154 5.857 0.210
Process PI 1.071 0.784 0.855 0.652 5.102 0.277 9.541 0.049
Integration SI 7.773 0.051 0.274 0.872 8.332 0.080 8.565 0.073

Table 9 Mean rank of groups that reject the null hypothesis

Growth strategy BabyGazelle Gazelles Gophers Mice

Content* 28.81 26 37.33 12 20.46 13 19.25 4
Partnership* 30.23 26 33.04 12 25.73 13 5.75 4
Commitment** 29.33 26 35.63 12 22.15 13 15.50 4
Control** 30.42 26 33.00 12 23.50 13 11.88 4
Integration** 26.73 26 38.75 12 22.88 13 20.63 4
Product-focus Convenience ShoppingD ShoppingH SpecialtyD SpecialtyC
Community** 20.70 10 21.75 10 36.14 7 34.78 18 23.65 10
Price sensitivity** 24.45 10 29.20 10 28.07 7 22.53 18 40.15 10
Integration** 18.85 10 26.20 10 41.36 7 28.39 18 28.90 10
Product-channel Convenience Shopping S-Pure S-Cross S-Integrated
Process* 23.75 10 34.35 17 18.56 8 20.50 8 33.83 12
Integration** 18.85 10 32.44 17 20.13 8 34.58 8 28.00 12
* and ** denote chi-squares are statistically significant at p < 0.05 and p < 0.10,
respectively. The number next to the mean rank indicates the groups sample size.

4.2.1 Growth strategy

The above test procedure was repeated for other factors. As shown in Table 8, there are
statistically significant differences in the frequency distribution of implementing content
and partnership factors among the groups adopting different growth strategies, where
2(3) for content = 8.257 and 2(3) for partnership = 9.796 at the p < 0.05 level.
Marginally significant differences are also observed in the frequency of adopting
commitment, control and integration factors at p < 0.10 level. Gazelles have the highest
mean rank, followed by baby gazelles, gophers and mice accordingly (Table 9).
Remarkably, the rankings have been consistent for all the five factors.
 Effective e-commerce strategies for small online retailers 461

The results show that growth-oriented gazelles and baby gazelles consistently deploy
more resources to enrich web content, set up proper systems to control key business
processes, build rewarding partnerships with customers, suppliers and other businesses to
streamline operations, leverage brand awareness and seize business opportunities, and
link up internal and external IT systems to achieve ultimate service quality, performance
and productivity. Feindt et al. (2002) noted that many baby gazelles implement a scalable
integrated system right from the beginning to prepare themselves for high volume
business and low operating costs. This observation is now statistically verified by this
research.
Baby gazelles and gazelles positive attitude towards growth is reflected in the
commitment factor, with corresponding higher mean ranks than those for gophers and
mice. The finding validates the anecdotal evidences cited in other studies that stressed the
importance of owners enthusiasm towards new ideas, technologies, business
opportunities, talents and strategic partnerships for enabling the rapid growth of small
businesses (Poon and Swatman 1999; Feindt et al., 2002).

4.2.2 Phase of growth

No significant difference in the distribution of mean ranks is observed for all factors and
financial measures among the start-up, growth and mature groups identified by phase of
growth (Table 8). This finding differs from the result of Feindt et al.s (2002) qualitative
analysis of baby gazelles in e-commerce, which noted that the importance of different
factors changed when e-merchants entered different phases of growth. Feindt et al.s
research only considered the influences of a companys phase of growth and competitive
focus on the adoption of critical success factors. The pattern identified in Feindt et al.s
research might be attributed to other critical effects from growth strategy, product
classification and channel strategy uncovered in this research, and incorrectly credited to
phase of growth, since the conclusion was drawn from qualitative observation.

4.2.3 Product classification and competitive focus

There are marginally significant differences in the frequency of adopting community,
pricing and integration factors at the p < 0.10 level among groups defined by
combinations of grouping variables from product classification and competitive focus
(Table 8).
Figure 2 shows that hybrid-shopping retailers and differentiated-specialty retailers
deploy more resources to build online communities to encourage interactions among
like-minded customers and organisations. A vibrant online community can offer
many opportunities for the retailers to increase sales and profitability (Rao et al.,
2003). In contrast, convenience goods retailers and specialty retailers that adopt
low-cost strategy tend to deploy lesser efforts on building online community.
This is understandable since they compete primarily on prices. The motive of
differentiated-shopping retailers is unclear with its relatively low mean rank for
community factor (Table 9). More information is needed to understand their strategies.
The Kruskal-Wallis test on pricing factor confirms the general observation that
low-cost retailers are more price-sensitive (mean rank of 40.15). They usually sell
commodity-like items such as electronic devices, airline tickets, books and CDs at lower
prices and maintain their profitability by charging premiums on specialised services.
462 P.J.S. Tan et al.

In general, they are more efficient than other retailers because only an efficient store
could lower the cost of trading and pass the savings to customers (Feindt et al., 2002;
Lee and Kozar, 2006).

Figure 2 High adoption of selected factors by product-focus groups of retailers

Figure 2 also confirms that differentiated-shopping retailers (mean rank of 29.20) are
more price-sensitive than their differentiated-specialty counterparts (mean rank of 22.53).
In the process of selecting and purchasing shopping goods, customers tend to compare
alternative products on their suitability, quality, price and style. On the other hand,
specialty goods have unique characteristics or brand identification that appeals to buyers
who are willing to pay a higher price to get what they want (Kotler, 1986).
The distribution of mean ranks among the groups for interaction factor shows that
hybrid-shopping retailers deploy many more resources (a very high mean rank of 41.36)
to link up their business operations than other retailers. This is understandable since
hybrid-shopping retailers tend to carry a wider range of merchandises and are generally
more established and larger in scale of operations than specialty retailers. On the other
end, the convenience group has the lowest mean rank. Most of the retailers in the
convenience group sell convenience goods such as food, gifts and flowers. Perhaps, these
products require more human inputs and many of the work processes could not be
computerised.

4.2.4 Product classification and channel strategy

The Kruskal-Wallis test on product-channel groups shows significant differences in the
frequency of adopting process and integration factors at the p < 0.05 and p < 0.10 levels,
respectively. The effects are illustrated in Figure 3.
The shopping group, over 80% of which comprises store-based and integrated
e-merchants, deploy more resources to improve the business processes and integrate their
business operations with internal and external IT systems. Pure-play shopping retailers,
if they are removed from the shopping group, are unlikely to incur unnecessary expenses
on process improvement and integration because of their much simpler operations.

Figure 3 High adoption of selected factors by product-channel groups of retailers

 Effective e-commerce strategies for small online retailers 463

Cross-channel specialty retailers place more emphasis on computerising their internal and
external systems and less effort on process improvement than their integrated
counterparts. Perhaps, the operations of integrated e-merchants are much more complex
and improving the multi-modal operation processes is given higher priority than
enterprise-wide computerisation. The reverse may be true for cross-channel operators
with simpler business processes.

5 Results and discussions

After years of strong double-digit growth, online retail sales in the USA are showing
signs of slowing down. Maturing of the e-commerce industry can happen very fast.
Notwithstanding when market maturity will set in, it is important that online retailers
prepare themselves for the increasingly competitive pressures from more demanding
consumers, experienced e-commerce players, traditional brick-and-mortar retailers and
new entrants attracted to the growing online retailing market.
Small online retailers aspiring to become promising gazelles can learn some lessons
from the e-commerce strategies presented in Section 4.2.1. Most gazelles and baby
gazelles deploy considerable resources to enrich web content, set up systems to control
various business processes, build rewarding partnerships with other businesses, and
integrate their business operations with both internal and external IT systems.
These effective e-commerce practices adopted by successful gazelles are collectively
grouped under fundamental growth strategies in Figure 4. While adopting the right mix of
e-commerce practices is important to success, rapid growth of small businesses is
primarily a matter of entrepreneurship. As noted in Section 4, business owners aspiring to
become tomorrows gazelles must be open and flexible to adopt new ideas, technologies
and business opportunities and seek talents and strategic partnerships to enable rapid
growth of their businesses. They must also be prepared to reinvent business strategy and
change organisation structure and merchandise mix as they adapt quickly to market
changes.

Figure 4 Strategic e-commerce management model

464 P.J.S. Tan et al.

Having adopted the above strategies, the small business is now well prepared for rapid
growth. However, there is still some fine-tuning to be done for the small online retailer,
based on product classification, competitive focus and channel strategy. Since product
classification is the common denominator in the multi-faceted relationships among the
three aspects of competitive profile, we shall divide the retailers into two broad groups,
shopping and specialty, as illustrated in Figure 4.
As noted in our discussions in Sections 4.2.3 and 4.2.4, hybrid retailers selling
shopping goods generally deploy more resources to build an online community to
encourage interaction among like-minded customers and organisations. They also deploy
many more resources (a very high mean rank of 41.36) to integrate their business
operations than other retailers. In general, retailers selling shopping goods deploy more
resources in process improvement and system integration. This is understandable since
these retailers carry a wider range of merchandise and are generally more established and
larger in scale of operations than specialty retailers.
Specialty retailers, adopting differentiation strategies, also rely on building a
vibrant online community to increase sales and profitability, while those adopting
low-cost strategies tend to compete primarily on prices. Cross-channel specialty
retailers place more emphasis on computerising their internal and external systems
and less effort on process improvement than their integrated counterparts. Perhaps,
the operations of integrated e-merchants are much more complex and improving
the multi-modal operation processes is given higher priority than enterprise-wide
computerisation.
Retailers that are contented to be gophers or mice can deploy more resources
on implementing strategies peculiar to their competitive profiles. Other critical success
factors not mentioned in the above discussion cannot be ignored. All e-merchants
are expected to adopt the essential practices under each factor to ensure the
smooth running of the e-commerce operations, except that practices which require a
considerable amount of effort and resources to set up and maintain may be given less
emphasis.
Hopefully, the strategic e-commerce management model will help small online
retailers to make a better-informed decision on how to allocate their resources to build a
successful business online and, in turn, inspire more small business owners to venture
into e-commerce. The potential economic benefits are significant given the strategic roles
of SMEs in global economies at both micro and macro levels.

5.1 Effects of competitive profile

There were only 55 responses despite sending out invitations to a mailing list three times
over a two-month period. This small sample size greatly restricted the accuracy and the
type of statistical procedures performed in this study.
An attempt to use principal component analysis to uncover the underlying
components from the large set of 58 variables failed because of inadequate subjects.
This will not affect the accuracy of subsequent analyses because the critical success
factors as defined by our carefully compiled questions had minimal multi-collinearity
problems. However, the reliability test on the factors mean scores identified four factors
with below-par Cronbachs alpha values, indicating that inter-item scores in the
factor had lower than expected correlation. The formula for calculating Cronbachs alpha
 Effective e-commerce strategies for small online retailers 465

shows that the ratio rises in value as the samples size increases (Wilkinson and
Engelman, 2007).
To examine the effects of competitive profile on critical success factors, the survey
sample was divided into groups using grouping variables derived from various aspects of
the competitive profile. Due to the small sample size, many of the cells in the two-way
cross-tabulation of group clusters were sparse, with less than five subjects. This
shortcoming might contribute to possible errors in the chi-square significance tests.
In addition, many of the sparse cells in the cross-tabulation of groups derived from the
combination of product classification and competitive focus as well as product
classification and channel strategy were merged together to form larger groups, thereby
losing valuable information on the smaller segments.
A re-look into the groups interaction effects and the effects of competitive profile on
all the research variables is necessary when we have a large sample. Principal component
analysis should also be used to uncover the underlying components because the critical
success factors are not mutually exclusive entities and it is highly likely that some
practices in one factor are executed together with other practices in other factors at the
same time.
Exploring the effects of competitive profile on the adoption of critical success factors
gives us the answer to emulate the factors that contribute to the success of other small
online retailers. It does not give us the answers to what online retailers can do to achieve
common business objectives such as improving profit margin, increasing profitability and
accelerating business growth. If we have access to a large pool of suitable respondents,
we can perform multiple regression analyses to discover the critical success factors that
are most effective in helping e-merchants deliver the desired business performance.
The effects of competitive profile on these effective prediction models are also worth
exploring.
It is not practical to expect small businesses to expend equal effort and resources on
all critical success factors. Findings from our research will help small online retailers
make a better decision on how to allocate their limited resources to e-commerce
operations that are more likely to deliver the desired business performance.
The significance of this researchs results in advancing e-commerce development should
provide adequate incentive to conduct a large scale survey for this study. A large sample
size is needed to verify this researchs findings and perform those analyses that could not
be implemented due to the small sample size. The following measures should be
implemented to increase the chance of soliciting a large number of responses.
Some respondents encountered difficulties in completing the online questionnaire,
which had close to 70 questions in two sections. They cited a lack of understanding
in some of the concepts raised in the questionnaire. An impersonal approach to data
collection was not an appropriate option for conducting complex survey. Telephone or
face-to-face interviews should be used to collate the data. Endorsement and support from
relevant official organisations such as the National Retail Federation and Small Business
Development Corporation are crucial to ensure higher participation rates from suitable
respondents. This is necessary because many respondents were either reluctant to reveal
their financial figures or were unable to provide separate financial data for their online
operations.
466 P.J.S. Tan et al.

Nevertheless, this research offers statistical insights into the multi-faceted

relationships among competitive profiles and critical success factors. If the researchs
findings can be verified by a large sample size and additional analyses undertaken on the
effects on business performance, the strategic e-commerce management model could
potentially become a very useful tool in helping small online retailers manage their
resources effectively.

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468 P.J.S. Tan et al.

Appendix: Questionnaire

Section A: Business information

1 Respondents Name: ____________________
2 Respondents E-Mail: ___________________
3 Stores URL: __________________________
4 Product Classification:
Collectibles, Gifts and Flowers
Automobile Parts and Supplies
Toys, Games and Baby Products
Beauty and Personal Care
Books, Magazines and Educational Products
Home Decor, Electrical and Electronics
Office Equipment, Computer and Accessories
Food and Beverages
Garden, Outdoor Living and Travel
Music, Video and Entertainment
Fashion, Jewellery, Watches and Accessories
Health, Fitness and Sports
Others. Please specify your category: ________________________
5. Number of Employees: _________
6. Growth Strategy:
_ Your business has grown more than 20% per year over the past five years.
_ Your business is small, but the owners are committed to growth and innovation.
_ The business owners have no interest in growing the small profitable business
into a large company.
_ The owners will grow the business within their means without sacrificing their
quality of life.
7. Competitive Focus:
All SMEs taking up e-commerce must start out in a niche market, with some means
of differentiating themselves from their competition. From this position, they may
move into a broad market based on differentiation, or in a few cases, into a niche
market where they can offer a cost advantage. Please select the option that best
describes your business' competitive focus.
_ No formal definition or understanding of your business competitive strategy.
_ You offer differentiated products or services in a small market segment.
_ You offer differentiated products in the mass market to achieve rapid growth.
_ You dominate a few niche markets by offering cost advantage.
 Effective e-commerce strategies for small online retailers 469

_ Your business uses a hybrid model by adopting differentiation strategy on some

product lines and low-price strategy on others.
8. Phase of Growth:
_ Establish competitive advantage through differentiation and cost leadership.
_ Grow customer bases rapidly through sales promotion.
_ Increase sales to existing customers.
_ Sell existing products to new market segments.
_ Offer new products or services to existing customers.
_ Start or acquire new businesses that complement existing e-commerce business.
_ Initiate process re-engineering and integration to support high-volume sales.
9. Channel Strategy: Pure Play e-Retailer
Catalog-based e-Retailer
Store-based e-Retailer
Integrated Retailer (Web, Catalog and Store)
10. Number of Years Involved in E-Commerce: ______ years

Section B: Critical success factors

The questions under each critical success factor are related to current e-commerce
practices adopted by online retailers. Please go through each question carefully and
decide the frequency of which your company has implemented each business practice
according to a five-point Likert scale Always, Often, Sometimes, Seldom and Never.
Commitment
1 Is the business owner involved in the day-to-day running of the business?
2 Is the owner-manager open and flexible to new ideas, technologies and
opportunities?
3 Does the business adapt to market changes and reinvent its business strategy
quickly?
4 Does the business have access to technical and managerial expertise in e-
commerce?
5 Does the business seek strategic partners or venture capitalists to help grow
rapidly?
Content
6 Are your customers satisfied with the variety of products sold on your website?
7 Do you recommend related products to customers based on their purchasing
patterns?
8 Do you sell related products together at special bundled prices?
9 Do you adhere to pre-defined style rules and procedures for updating web
content?
470 P.J.S. Tan et al.

10 Do you conduct surveys to understand customers needs and take steps to enrich
your merchandise mix and web content?
11 Do you work with other service providers to provide relevant content on your site?
Convenience
12 Do you involve customers in usability tests to ensure that your site is easy to use?
13 Do customers use your on-site search engine frequently?
14 Do you change the site design to create the right appeal and theme for different
shopping seasons?
15 Do you provide fun, multimedia or interactive elements on your website?
16 Do you always strike a balance between an attractive design and fast loading time?
Interaction
17 Do you always respond to customers online queries within one hour?
18 Can customers contact you via phone or online real-time chat all the time?
19 Is e-mail marketing to in-house mailing lists your most effective marketing tool?
20 Do you reward loyal customers with private sales and other benefits?
21 Do you always uphold high ethical standards in customer privacy and refund
policies?
22 Do you always fulfil orders promptly and in good condition within the stipulated
time?
Control
23 Do you conduct service quality surveys regularly for key business processes?
24 Do you evaluate your service staffs performance in handling queries and
complaints?
25 Do you provide ongoing training to equip your service staff with relevant product
and business knowledge?
26 Do you always succeed in stopping online fraudulent transactions?
27 Do you use web metrics to analyse traffic and track sales conversion rates?
Community
28 Do you provide an e-platform that allows users to share and exchange information,
products and services with one another?
29 Do you publish and distribute an e-newsletter with content that appeals to your
target customers?
30 Do you organise social events and recreational activities for your customers?
31 Do you offer incentives such as recognition, commissions or free product trials to
encourage customers to submit product reviews on your site?
32 Do you have committed forum leaders or experts to host your online chat room or
forum?
 Effective e-commerce strategies for small online retailers 471

Price sensitivity
33 Do you price your products comparatively lower than most of your competitors?
34 Do you offer specialised services or promote a specific lifestyle to complement
your products?
35 Do you sell products that are not widely available in your local market?
36 Do you offer free or discounted shipping during major shopping seasons?
37 Do you offer heavily discounted specials to remove excessive or slow-moving
stock?
Brand image
38 Does your branding strategy help your customers relate your products and
services to their needs?
39 Are you aware of your business competitive advantage over your competitors
strengths and weaknesses?
40 Do you position your business in terms of its perceived benefits through
advertising?
41 Do you promote your brand heavily to increase awareness and sales rapidly?
42 Do you sell only branded products on your website?
Partnership
43 Do you run a programme to reward affiliates for referring customers to your e-
store?
44 Do you use sponsored keyword search engines such as Google Adwords and
Overtures to drive traffic to your website?
45 Do you work with manufacturers to offer customised products to your customers?
46 Do you form strategic alliances with other businesses to run large-scale marketing
activities, expand service offerings or work together on large projects?
47 Are you an active member of any professional association or business
community?
Process improvement
48 Can your business adapt quickly to changes in market conditions, demands and
technology?
49 Do you attempt to incorporate web-based operations into your brick-and-mortar
business processes?
50 Do you offer enriched shopping experience for your customers with integrated
cross-channel services, sales promotion and marketing activities?
51 Do you use a content management system to identify visitors to your website and
present personalised content to them?
52 Do you have a computerised system to analyse past purchasing patterns and
recommend relevant products and services to each shopper?
53 Do you automate the online ordering process to reflect discounts, taxes and
shipping charges in local currency instantaneously?
472 P.J.S. Tan et al.

Integration
54 Is your e-store linked electronically to the supply chain system? Can it provide
accurate inventory tracking, price updates and just-in-time stock replenishment?
55 Is your order fulfilment system capable of delivering up-to-date status reports?
56 Is your e-payment system capable of detecting potential frauds and
acknowledging successful transactions in real-time?
57 Is your customer relation management system optimised to track and respond to
queries and complaints, publish and broadcast e-newsletters, and manage mailing
lists promptly and effectively?
58 Is your content management system optimised to deliver third party and in-house
content efficiently?