Chapter 6 6 Web, Nonstore-Based, and Other Forms of Nontraditional Retailing Dr. Pointer Dr. Pointer
Mar 28, 2015
Chapter 66
Web, Nonstore-Based, and Other Forms of Nontraditional Retailing
Dr. PointerDr. Pointer
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Chapter Objectives
To contrast single-channel and multi-channel retailing
To look at the characteristics of the three major retail institutions involved with nonstore-based strategy mixes: direct marketing, direct selling, and vending machines – with an emphasis on direct marketing
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Chapter Objectives_2
To explore the emergence of electronic retailing through the World Wide Web
To discuss two other nontraditional forms of retailing: video kiosks and airport retailing
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Different Channels for Retailing
• Single Channel – sells to consumers through one retail format- can be store based or non store based
• Multi channel – retailer sells to consumers through multiple retail formats : Wal-Mart selling thru its Wal-Mart stores, Sam’s Club, Web and Neighborhood Markets
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Approaches to Retailing Channels Examples
Store-based retailer with
one format
Mail order sporting goods
selling thru Catalog and Web
Mail order sporting goods
selling only thru catalog
Store-based retailer selling thru catalogs
Store-based retailer selling
thru catalogs and web
Mail order sporting goods
selling thru Catalog, Web &
Dept store
Single Channel
Retailing
Multi- Channel Retailing
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Nonstore Retailing
Non store retailing is when they use strategy mixes that are not store-base to reach consumers and complete transactions
It exceeds $300 billion annually78% comes from direct marketingWeb-based retailing is fastest growing
area
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Nontraditional Retailing
Nontraditional retailing also includes formats that do not fit into the store and non-store based categories:Video kiosksAirport retailing
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Direct Marketing
Customer is first exposed to a good or service through a nonpersonal medium and then orders by mail, phone, fax, or computer
Annual U.S. sales exceed $235 billionOther leading countries with strong DM
* Japan* Germany* Great Britain
*France
*Italy
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Characteristics of Direct Marketing Customers
• Married• Upper middle class• 36-50 years old• Desires convenience, unique
merchandise, good prices
Typical Direct Marketing Consumer is
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Direct Marketing Categories
GENERAL
• offer full lines of products from clothing to housewares
– J.C. Penney– QVC
SPECIALTY
• offer narrow product lines
– L.L. Bean– Franklin Mint
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Strategic Business Advantages of Direct Marketing
Reduced costsLower pricesLarge geographic coverageConvenient to customersAbility to pinpoint customer segmentsAbility to eliminate sales tax for someAbility to supplement regular business
without additional outlets
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Strategic Business Limitations of Direct Marketing
Products cannot be examined prior to purchase
Costs may be underestimatedResponse rates to catalogs under 10%Clutter existsLong lead time requiredIndustry reputation sometimes negative
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Domain of Direct Marketing
• Direct marketing is a form of retailing in which a consumer is exposed to a good or service through a nonpersonal medium and then orders by mail, phone, fax or computer.
• Viewed as an interactive system• DM includes any catalog, mail, TV, radio,
magazine, newspaper, phone directory, fax or ad; computer-based transaction or any non personal contact that stimulates customers to place a order by phone, fax, mail or computer.
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Database Retailing- Data base key to success
Collection, storage, and usage of relevant customer information* name* address* background* shopping interests* purchase behavior
Observation of 80-20 rule
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Emerging Trends in Direct marketing
Evolving activitiesChanging customer lifestylesIncreasing competitionIncreasing usage of dual distribution
channelsChanging media roles, technological
advances, and global penetration
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Increasing usage of dual distribution channels
• More retailers adding web site, catalogs, Television ads to reach consumers and stay competitive.
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Changing media roles, technological advances, and global penetration
• Many firms printing multi catalogs, specialogs• Specialogs catalogs emphasizes a limited number
of items and has reduced postage and productions costs
• Infomercials is a program length TV commercial that airs on cable or broadcast TV, often during late night fringe - (30-60 minutes in length)
• Technology allows for better targeting with special media
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Evolving activities
• Technology is a big factor in success of nonstore retailing
• Multi-channel retailing is utilized by many more firms today
• Increased focus on data-based retailing• Firms have privacy policies
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Changing customer lifestyles
• Consumers’ life-styles have shifted dramatically over the past 35 years
• Large number of working women• Therefore, they don’t have time to shop as
before. That’s why some forms of nonstore retailing is gaining popularity
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Increasing competition
• More companies now compete in direct marketing format
• More companies in market due to lower entry costs and ease of operation
• Direct marketing lures many small firms which are under capitalized and have high failure rates
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Factors consumers consider to Select Direct Marketer
Company reputation and image Ability to shop whenever consumer wants Types of goods and services Availability of toll-free phone number or Web site
for ordering Credit card acceptance Speed of promised delivery time Competitive prices Satisfaction with past purchases and good return
policy
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Steps in Executing a Direct Marketing Strategy
1. Business definition 2. Generating customers
2. Media selection 3. Presenting the message 4. Customer contact
5. Customer responses 6.Order fulfillment and
7. Measuring results -- Feedback
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Executing a Direct Marketing Strategy
• Business definition – What format? single channel or multi channel format
• Generating customers – How will you get your customer database? – several ways to do it (pg 136)
• Media Selection - Several alternatives available – one or multiple types of media
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Media Selection
Printed catalogs Direct-mail ads and
brochures Inserts with monthly
credit card and other bills (statement stuffers)
Freestanding displays
Ads or programs in mass media
Banner ads or hot links on the Web
Video kiosks
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Executing a Direct Marketing Strategy Cont’d
• Presenting message – develop an effective message that will engender interest, create right image, provide data on products
• Customer contact – Do you contact all in data base or selective ones? How often to contact?
• Customer response I one of 3 ways, order, request more information, or ignore the message
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Outcome Measures
Overall Response RateAverage Purchase AmountSales Volume by Product CategoryValue of list brokers
Important to analyze results because feedback can help to update data base, product mix and promotion
programs
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Issues Facing Direct marketers
• Many people dislike one or more aspects of direct marketers
• Most dissatisfied with late deliveries, deceptive claims, and broken or damage merchandise
• Most people would like to receive less direct mail pieces although most open all mail
• Consumers are concerned with their personal information being sold
• Direct marketers must battle the legal environment to make sure more restrictive laws are not passed
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Direct Selling( a form of nonstore retailing)
• Direct selling includes both personal contact with consumers in their homes and other non store locations such as offices and phone solicitations initiated by a retailer
• $27 billion in annual sales• Mkt strategy emphasizes convenient
shopping and a personal touch
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Table 6.1 Snapshot of U.S. Direct Selling Industry
Major Product Groups % of Industry
Home/ family care products 33.7
Personal care products 26.4
Services 16.9
Wellness products 16.5
Leisure/ educationalproducts
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Table 6.1 Snapshot of U.S. Direct Selling Industry
Place of Sales % of Industry
In the home 64.4
Over the phone 14.7
In a workplace 8.7
Over the Internet 5.5
Other 6.7
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Reasons for Slow Growth of Direct Selling
• More women working• Better job opportunities in other fields have reduced
pool of qualified people• Firm’s mkt coverage is limited by size of sales force• Sales productivity is low and average sale is small• 25-50% of sales is commission to sales people
which makes prices higher to consumers• Various legal restrictions apply due to high pressure
and often deceptive tactics of sales people
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Vending Machine Sales (form of nonstore retailing)
• Vending machines is a cash or card-operated retailing format that dispenses goods or services
• Eliminates the need for sales personnel• $40 billion in annual U.S. sales• 85 % of merchandise is beverages• Cigarette sales have gone from 25% of
sales to 2%• Items over $1.50 don’t sell well
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Electronic Retailing is growing
• Internet is a global electronic super highway of computers networks that use a common protocol and are linked by telecommunication lines and satellite
• World Wide Web (Web) is a way to access information on the internet, whereby users use easy to use Web addresses and web pages.
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The Role of the Web
Project a retail presenceEnhance imageGenerate salesReach geographically-dispersed
customersProvide information to customersPromote new productsDemonstrate new product benefits
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The Role of the Web_2
Provide customer service (e.g., e-mail)Be more “personal” with consumersConduct a retail business efficientlyObtain customer feedbackPromote special offersDescribe employment opportunitiesPresent information to potential
investors, franchisees, and the media
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Figure 6.6 Web-Based U.S. Retail Sales
Greatest percentage is for computer hardware/software -25%
Apparel is only 7.5 %
Books and magazines 7.0%
Electronics and appliances – 5.4%
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Figure 6.8 Five Stages of Developing a Retail Web Presence
1. Brochure Web Site
2. Commerce Web Site
3. Integrated Web Site
4. The ‘Webified’ Store
5. Site Integrated with Manufacturer Systems
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Information on Web Usage
Why Use the Web– information– entertainment– interactive
communications
`Why Shop Online– selection– prices– convenience– fun
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Reasons NOT to Shop Online
Trust
Fear
Lack of security
Lack of personal communication
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Characteristics of Web Users
• About equal number of males and females
47% Females vs. 53% males• Educated with good income
average income of $50K or above
75% have at least attended college• Those shopping on web, over half spend
$250 or more and 67% shop at 5 times
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Recommendations for Web Retailers
Develop or exploit a well-known, trustworthy retailer name
Tailor the product assortment for Web shoppers
Enable the shopper to click as little as possible
Provide a solid search engineUse customer information
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Other nontraditional forms of Retailing
• Video Kiosks- a freestanding, interactive, electronic computer terminal that displays products and related information on a video screen
• 1.5 mm in U.S. and account for $3 billion in sales
• Very flexible and can be located in many different places
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Other nontraditional forms of Retailing
• Airport Retailing – major retailing mecca• Large potential markets• Variety of retailers such as fast food, gift
shops and now some mall specialty retailers are moving to the airport.. Walden Bookstore
• Generates annual sales of $6 billion
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Features of Airport Retailing
Large group of prospective shoppersCaptive audienceStrong sales per square foot of retail
spaceStrong sales of gift and travel itemsDifficulty in replenishmentLonger operating hoursDuty-free shopping possible
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Questions