Online retailing: determinants of competition between multinationals and local firms in emerging markets

Abstract

PurposeThe fundamental research question is which aspects of the external environment are most strongly associated with the differential market share between large multinational online retailers and smaller, local retailers in emerging markets. For the purposes of this study, the differential market share refers to the likelihood of having a higher market share for multinational online retailers than for local online retailers.Design/methodology/approachThe theoretical framework of the study is based on PESTLE analysis. This study uses longitudinal country-level archival data and conducts a stepwise logistic regression analysis to investigate the impact of environmental factors.FindingsThe results indicate that the effectiveness of law-making bodies and government involvement with information and communications technologies (ICTs) among other factors are significantly associated with a higher market share for multinational online retailers relative to local retailers.Research limitations/implicationsThe study examines the impact of certain external factors (i.e. socioeconomic variables and legal environment) on the differential market share between multinational online retailers and local ones. Future research should investigate additional factors such as cultural roles and internal operating dynamics of online retailers. The research emphasizes online retailing. A logical extension of the current study is to examine how the online retailing environment differs from the brick-in-store retailing environment relative to the competition. The current study investigates the differential market share between multinational and local online retailers only in the emerging markets setting. The results may differ if the developed market setting is also considered. We recommend that future research compares the developed markets and emerging markets settings relative to the differential market share between multinational and local online retailers.Practical implicationsNot all improvements in legal institutions are associated with improved market conditions for multinational online retailers. Managers of multinational online retailers must pursue some mitigation strategies to prevent institutional voids in emerging markets. Therefore, adapting the business model by collaborating and establishing relationships with local online retailers is an effective strategy to mitigate institutional voids (Doh et al., 2017; Yang et al., 2012). Moreover, multinational online retailers are recommended to collaborate with local governments to change unfavourable legal conditions (Doh et al., 2017; Boddewyn and Doh, 2011).Originality/valueThe extant literature on online retailing frequently addresses internal company characteristics and consumer behaviour. This study focuses exclusively on environmental factors associated with differential market share. We contribute to the literature on online retailing, retailing strategies and competition dynamics in emerging markets.

Drivers of formal and informal retail patronage in emerging markets

“…Some scholars argue for FRFs to replace IRFs due to modern shopping offered by FRFs but acknowledge that many still prefer IRFs (Maruyama and Wu, 2014;Maruyama et al, 2016). Some scholars differentiate competitive advantage of both formats with environmental factors driving patronage of FRF online (Kardes et al, 2021), and IRFs offline (Dholakia et al, 2018). Thus, FRF and IRF patrons may not be mutually exclusive as customers may shop across both formats to satisfy different motives.…”

“…Often described as the next retail frontier, emerging markets have attracted global retailers often competing with local informal retailers (Jerath et al, 2016). Although, comparatively, global retailers have enhanced retailing capabilities (Kardes et al, 2021), they still face stiff competition from local informal retail formats (IRF) (Dholakia et al, 2018;Singh and Wagner, 2019). Thus, while the entry of large supermarket chains into emerging markets has reduced IRF numbers, those remaining IRFs have become stronger competitors of global retail giants (Jerath et al, 2016).…”

“…However, prior literature on patronage of FRFs and IRFs in emerging markets has mostly focused on factors influencing consumers from different market segments to choose either format (Maruyama and Wu, 2014;Maruyama et al, 2016). Studies investigating these factors for consumers within the same market segment, often view the impact of these factors on one format as inversely related to the other (Hino, 2014;Kardes et al, 2021;Paswan et al, 2010). Therefore, how consumers in the same segment patronize FRFs and IRFs as substitutes or complements in emerging markets remains less understood.…”

Antecedents and consequences of consumer hope for digital payment apps services

“…Newman et al (2018) explored the role of ease of use that affects consumer behavior, future intentions and recommendations. Kardes et al (2021) explored the ways to reduce institutional gaps. Lee (2018).…”

E-Commerce Firms' Geographic Scope: Roles of Intangible Resources and Country-Specific Moderators

“…Country development might affect the value of website traffic transfer to foreign markets. Firms' website traffic highly depends on the accessibility and use of the internet in host countries (Kardes et al 2020). Developed markets have the highest internet penetration rate worldwide and a more developed internet infrastructure (e.g., connection speed).…”