E-commerce Environment, Experience-based Channel Selection Decisions

In recent years, with online payments and logistics systems are perfected, more and more in-depth the domestic e-commerce have developed and the era of e-commerce is coming round. Under such circumstances, the choice, contrast and other issues between the online and offline channels have been the focus of the experts and scholars in this field.In this paper, after reviewing the existing research about decision-making of channel choice, we found out that the research on the contrast between the online and offline channels generally focused on channel participants and build models from the perspective of game theory while lack of study on characteristics of the product itself. Based on experiences, we explored the channel selection problem in the context of the e-commerce from the point of view of characteristics of the product and risk preferences of customers.Based on realistic scenarios and Salop Circular Model, a hypothetical system has been abstracted, and so built an economic model, and then derivation and verification were carried out. Then, from the point of view of products' experience-degree and customers' risk preferences, we analyzed and interpreted the model results and finally integrated products' experience-degree and customers' risk preferences as one factor which is experience, by this, we explored the channel selection problem in the future direction in the context of the full advent of the era of e-commerce. Further more, the paper also introduced a practical case, conducted in-depth analysis and discussion.Through the model derivation and demonstration, we can find out:in the hypothetical system abstracted from the realistic cases, when business e-commerce has developed fully mature, action taken by economically rational merchants is closely related to the capacity/size of enterprise itself, the nature of the products and the characteristics of customers, and we can use "experience" as a reasonable explanation of these three elements.According to different capacity of business, it can be decomposed into "growth stage", "giant stage", for "growth stage", most businesses can take "free rider" approach to realize "product perception knowledge transfer," or provide the product experience by unconditional return within controllable cost, but unnecessary to provide experience through off-line stores. In the "giant stage", it's necessary to focus on the training of customers'knowledge about products, and carefully consider various options of ways by which experience provided to customers, in addition to the unconditional approach mentioned above. Through analysis, we believe the main way to provide products experience is off-line stores.According to the nature of the product, there were two cases in the study:(1) product and service with a low degree of experience (the extreme case is 0, such as password of mobile phone recharge cards); (2) products and services with a high degree of experience. There is a line between (1) and (2), which can be derived under certain constraints.Customers' risk preference is another factor that needs to be carefully taken into account in the operation. In the narrow definition, this factor can be interpreted through "product experience", then the application of the model will be more convenient and effective. For different situations, we can select different appropriate action steps and programs according to the model and related conclusions.Finally, the paper introduced a fitting real case to conduct in-depth research and analysis; after a detailed discussion combined with model we derived inspirations with profound practical significance. After derivation and analysis, we can see a phenomenon of different ways leading to same result, some merchants have the off-line store first and then on-line store, and finally achieve a equilibrium, while others begin with on-line stores, and then off-line stores and finally reach equilibrium. Through the study we can also conclude that the nature of the product itself is an important factor affecting the final equilibrium. More precisely, higher the experience-degree a commodity has, more urgent the physical support is needed.