Abstract The rapid development of the Internet and mobile Internet technology has led many entities to engage in innovative practice of e-commerce. But there are also many Internet retailers such as Amazon and Alibaba actively working with physical retailers through investment and acquisitions. This article tries to explain the reasons for the different strategic choices of the enterprise i.e. online or physical retailing. On the basis of analyzing the impact of the Internet on retail enterprises, this paper establishes a general equilibrium model including consumers and the retailer, analyzing the basis for consumers to choose different retail enterprises, and the strategy of retail enterprises. The analysis results show that the relative expenditure ratio of consumers in different retail stores depends on the relative efficiency of service combination provided by retail stores. Therefore, the business strategy based on the “limited business circle” and “limited category” has become the key to increase sales of the enterprise, and the strategic choice of the online retail and the substantive retail can be summed up as the trade-off between the specialization of the category and the specialization of the region.
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