Digitalization in retailing: multi-sided platforms as drivers of industry transformation

Abstract

Purpose Digitalization has transformed several industries during the past two decades. In this paper the authors focus on the retail sector, where new business models help retailers and suppliers meet the ever changing and demanding needs of retail shoppers. One example of this business model innovation is multi-sided digital platforms, which have become popular as they connect consumers with suppliers from around the world with a large ecosystem to support the retail platform. The purpose of this paper is to provide an overview of how multi-sided digital platforms are transforming the retail exchange logic and assess the implications and impact of these platform-based businesses on the retail sector, especially for business managers and consumers. Design/methodology/approach In this paper, the authors employ literature review, conceptual analysis and qualitative case study methodology. The authors provide an overview of how the platform economy is affecting the retail sector through the illustration of four digital multi-sided platforms: Alibaba Group, Amazon.com, eBay and Rakuten Group, and what differentiates them from incumbent business models in retailing. Findings The findings suggest that platforms transform the transaction logic of retailing as they simply intermediate transactions between buyers and suppliers rather than handling the entire supply and logistics chain themselves. The authors highlight the role of consumer understanding and Big Data as one example of how multi-sided digital platforms differentiate from their non-platform competitors. Practical implications The paper highlights how incumbent retailers can compete against new forms of business, such as digital platforms, and the authors demonstrate some of the managerial capabilities needed to remain relevant amidst this new digital competition. Originality/value Very little empirical studies in marketing and retail literature have focused on multi-sided digital platforms and their business models. The present study fills this gap with an overview of how multi-sided digital platforms transform the retail sector.