Multi Channel Retailing Assignment

7/27/2019 Multi Channel Retailing Assignment

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2013

Submitted by:

Himanshu BhatiaPriyanka Sharma2/10/2013

Multi Channel Retailing


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Multi Channel Retailing

Retailers traditionally maintained a single department, offering sales and supportvia a single mode of customer interaction like the physical store. Over time this hasexpanded to include multiple ways of selling to, engaging, and interacting with thecustomer, primarily via mail, catalogue and telephone. Advancing technologyhowever, has led to a number of new ways of inter-personal interaction like theinternet, mobile phones, and interactive TV; and as these embed deeper into socialculture, subsequently new channels for offering product and service.

Multi-Channel then refers to the delivery of customer propositions via multiplechannels with at least some degree of cross channel integration in management,information and service, i.e. in a consistent and coordinated way across all

channels. Complete integration and sharing of information and experience acrossall channels is now being referred to as Merged-Channel retailing, but that's a storyfor another paper. If you want to know more, have a look at my paper on The HighStreet 2.0, which is about merging online and offline customer experiences.


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Drivers

While emerging technology has been a key enabler, multi-channel growth isessentially driven by consumers. According to Shop.org, 34% of consumers todayuse at least three channels when shopping. Research has found them to spend up to10 times more, to generate 25 to 50% more profit and demonstrate greater loyaltythan their single-channel counterparts. The core driver then is customer demand.The other major driver is cost saving through efficiency and effectiveness.

Managing channels separately may not only impair customer relationships but alsoresult in cost increases resulting from running separate order-management andcustomer service operations, multiple warehouses and fulfillment systems, and

buyers and merchandisers duplicating effort across the different channels.

Multi-channel is also driven by strategic competitive advantage and differentiationopportunities, and regulatory pressures around ensuring that all customers are ableto access products and services on offer.

BenefitsThere are a huge number of both organizational and customer related benefits to begained from implementing a multi-channel strategy. Heres a few:


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Organizational Benefits

Increased revenue and growth opportunitiesmore touch points into targetmarket

Better responsiveness and sensitivity to changing environments Competitive advantage over pure-plays particularly around immediacy,

education opportunities for complex products and easy e-merchandisereturns.

Organizational efficiency and effectiveness opportunities through sharing ofprocesses, technology and information

Customer Related benefits

Better and wider customer interaction with a greater variety of informationavailable for improved understanding of customers and identification ofopportunities for increasing value per customer (business intelligence)

Increased customer loyalty through better understanding of customers Better customer experience reducing churn and increasing loyalty Opportunity to leverage and improve brand perception Customers themselves also benefit from increased choice in interaction

opportunities and the ability to switch channels as convenient

Retail channel for interacting with customersMulti channel retailers are those retailers that sell merchandise or services through more

than one channel by using combination of channels, retailers and can leverage the unique

benefits provided by each to attract and satisfy more customers.


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STORE CHANNEL:

Stores offer a number of benefits to customers that they cannot get when shoppingthrough catalogs or on internets.

Browsing: Browsing is a quick examination of the relevance of a numberof objects which may or may not lead to a closer examination or

acquisition/selection of (some of) these object. Many customers surf on

net and look through catalogs or on the internet.

Touching and feeling Products: Stores provides customer to theopportunity to use all five of their senses:Touching, Smelling, Tasting, Seeing and hearing while examining the

product.


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Personal Service: At the time customer enters the store he gets the chanceby sales associates to provide more personalized information and advice

during transaction and purchase.

Cash Payment: Stores are the source which provides the direct cashpayments as they do not prefer to pay interest generally.

Entertainment and Social Experiences: In-store shopping can stimulateexperiences for some people providing a break in their daily routine and

enabling them to interact with personals.

Immediate Gratification: Stores have the advantage of allowingcustomers to get the merchandise immediately after they buy it. Risk Reduction: When customer purchase merchandise in stores, the

physical presence of the store assures them that any problem whit the

process will be corrected.


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CATALOG CHANNEL:

The catalog channel provides some benefits to customers that are not available from store

or internet channels. The process of selling by looking at the images of the product in the

form of book or a collection in a consolidated form is known as catalog buy.

Convenience Safety Quality of Visual Presentation


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INTERNET CHANNEL:

Shopping over the internet provides the connivance and safety benefits offered bycatalogs and other non store formats. The Internet compared with store catalog channels,

also has the potential to offer a greater selection of products and more personalized

information.

Broader selection More information to evaluate merchandize Personalization Selling merchandise with Touch and fell attributes Perceived risks in Electronic shopping


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Evolution towards multichannel retailing

The inclination of customers from traditional store based and catalog retailers to

multichannel retailers ends up with four reasons:

1)The electronic channel gives them an opportunity to overcome the limitations oftheir primary existing format.

2)Using an electronic channel, retailers can reach out to new markets.

3)Providing a multichannel offering builds share of wallet or the percentage oftotal purchases made by the customers from the retailer.

4)An electronic channel enables retailers to gain valuable insights into theirshopping behavior.


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OVERCOMING LIMITATIONS OF AN EXISTING FORMAT:

The size of store and maintenance cost with merchandise display constraints the customer

and with the blend of online retail store it became way easy to them. The Online stores

not only give benefits to sellers but also make the customer easy to buy, examine andpay.

EXPANDING MARKET PRESENCE:

As per themodern era coming to its glory and increasing day by day the retailers became

more advanced by becoming familiar with electronic devices and using online sources for

reaching to their customers and creating new markets for themselves. The virtual shopsare creating more profits with less human input physically and more mentally.


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INCREASING SHARE OF WALLET: The attractive growth in the internet field

made the influence on buying decision any day more than any other normal one. This not

only makes the customer mind trapped with the offerings which grabs the large amount

of investment over buying the offering on net and sometimes not even considering theneed of the product.

INSIGHTS INTO CUSTOMER SHOPPING BEHAVIOR: The regular surfing of

customer and association with online store capotes the data and buying habit insights into

the system which enables the system of the particular sight a bit customized as per the

customer need and preferences.


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Capabilities needed for multi-Channel Retailing :Era change occurred due to boom in technology and introduction of Internet

around the world. As previously all means of selling of goods and

commodities were carried through catalogues or stores.So now for efficient & effective utilization of multichannel retailing benefits

firms need to have following set of skills:

Developing assortments & managing Inventory Employee Management (Distant location) Proper distribution of merchandise (End to End) Catalogues & websites E- Order Processing Efficient Home distribution channel Information Integration (Supporting Seamless Customer

Experience)

Who has these Critical resources??Catalogue Retailers (Traditional Retailers)

Store based retailers(Traditional Retailers)

Electronic Retailers (Entrepreneurs)

Do Manufacturers use the e- channel to sell their products:Yes it happens sometimes but due to this disintermediation (bypassing

the retailer) they lack in various critical skills which are required to

sell the merchandise electronically also they lack in variety of

products and experience

in terms of customer handling and due to the bypassing they lose the

support of those retailers as well.

Which channel is the most profitable?Catalogue & store channels are more profitable as the merchandise

returns can be as high as 40 % for sales made through e-channels as

compared to 6% of return s through Stores & catalogue channels.


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Issues in multichannel retailing: Customers Need of getting Recognition Integration of Customer databases Brand image Merchandise assortment Pricing

Integrated Shopping experience:By providing various features & services to customers:

1) Liberal Store policies(Purchase & return)

2) Online ordering & store pickups

3) Coupons & discounts on website4) Free shipping of products

5) Cash on delivery/store

6) Website features retailers promotion & sales

But all the above experiences are not applicable everywhere due to:

=> the legacy systems installed at their places

=> some with a very large array of inventory

=> budget constraint for applying high end technology

E:g

Snap Deal/Flipkart/Zovi (Online Ordering)

BATATTK Prestige ( Exchange Anything for Anything)


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Brand Image:Evenness in Product image projection like:

=> Taste=> Colour

=> Type

=> Service

=> Variety

=> Quality

E:g => McDonalds

=> KFC

=> Big Bazaar (Iss se Sasta aur kahin nahi)


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=> BATA

Merchandise assortment:

Integration of Merchandise offering across channels by determining

assortment:

=> Firms retail strategy

=> Physical Characteristics of the store

=> Degree of Complementing of merchandise to each other.


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E:g => Big Bazaar

=> Reliance trends/Fresh/ Digital

KFC McDonalds

Pricing:=> Expected Pricing consistency

=> Pricing Strategy (a/c to competition)

>>low prices/self-selected variable pricing

>> Odd Pricing/Leader Pricing

=> Differential Pricing (a/c to local competition)

=>(Customers)Transaction History to be recognised by retailers

E:g

Snap Deal/Flipkart (Online Ordering)BATA


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TTK Prestige ( Exchange Anything for Anything)

Big Bazaar (Sabstey sastey paanch Din/ Maha Bachat Shop)


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Shopping in the Future

Shopping experience:Consider retailing a two-pronged challenge: On the one hand, retailers mustaccommodate the increasingly mobile consumer. On the other hand, the traditionalretailer can't ignore the need to drive that consumer to a physical store.

In fact, many retailers are beginning to realize that rather than close stores, theycan sustain them by giving them a much-needed facelift. More than a surfacemakeover, however, reinventing the store involves a thorough rework that often

includes a growing trend: creating a "brand story" to engage and involve aconsumer in the shopping experience.


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Not surprisingly, this trend may bring with it interactive, intuitive and futuristicelements, such as virtual shopping screens, audio/video presentations, QR code

integration and even robotic store displays.


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5 Things That Will Shape the Future of shopping experience are:

1) Stores will no longer need lots of stock

While that may sound absurd at first, as we move forward on-site stock wontbecome an issue as many people will be arriving in store to pick up an onlineordered product.

In fact, the numbers who are shopping in-store will be reduced as customers arrive

to look and test or try on the physical items before ordering them to their homeaddress via their mobiles or in-store ordering terminals.

Its not a farfetched idea either as 92 per cent of UK residents own a mobile phone,

and 96 per cent of shoppers admit to researching a product on their mobile beforemaking a purchase. Whats interesting is that, according to Webloyalty figures

from 2012, 92 per cent of shoppers say they still use physical storesmeaning thata future where a store is little more than a showroom and pick-up centre isnt thatabsurd to believe.

If a customer does come in for a browse and finds that an item isnt available, orthat the range on offer seems small, a handy augmented reality application could

provide an insight into everything available onlinealong with the various coloursand fits available to be ordered in and picked up.


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2) Stores will become education and experience centers

In the futurealthough its already beginning to happen now with Asian PaintsColour Stores and Bonobos Guideshopsstores will become places to educatecustomers into making the right purchase, which will be made elsewhere.

Of course, this begs the question as to why a customer doesnt just go to another

store to snap up the same product but cheaper. Experience stores would make theentire process effortless for a customer, therefore leading them to purchase from acompany with ease.

Both Bonobos and Asian Paints create an online basket or an RFID tag that meanswhen you go to their online store, or another outlet, you can find exactly what you

were guided through. It means the barrier for a customer to search and reorganizetheir basket is reducedmost will just purchase them because it works out as theeasier option.

These stores alsoprovide an experience for the consumer, meaning theyll comeback again and again to get the knowledge they need to make the right choice. Itessentially produces customer loyalty.


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3) Retail shopping will become 24/7

Its already the case when it comesto online retail, but soon itll be present in thephysical stores as customers want to be able to make purchases all day, every daypreferably with shorter waiting periods for their item to be delivered.

This is already creeping in with Adidas Germanys innovative window shopping

store, or the German grocery store Emmas Enkelboth of which allows users tomake purchases in-store while the outlets are closed via those infuriating QRcodes and touch screen interfaces.

Moving to the more extreme applications, Augmented Reality allows online-onlystores like Chinas Yihaodian to create always open stores inside physical

environmentswhile users shop with their augmented reality applications.


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4) Shopping will become far more personal

Online stores already try this with their Hello xxxxx at the top of a page when

youve logged in along with a list of items they think might be relevant, or ofinterest to you based on shopping history. But this is all entirely basic and analytics

based

Online stores can implement a more personal approach already by drawing upitems gathered from purchases in other stores online via a unified payment accountsuch as PayPal. From here a better picture of what a customer has purchased canbe drawn up and therefore better offers can be given to an individual.

This could also be done in store with a loyalty card capturing previous shopping

history. A scanner by the door could log a customer into the shopespecially if itutilized some sort of RFID tag or NFC technologyand a staff member with atablet would be able to identify them and see their previous shopping history.

Naturally, this would allow them to provide a better level of customer service andpersonalization to the shopping experiencerather like shopping used to be.


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5) Shopping will be far more social

Social media is growing fast and companies are still trying to jump aboard andutilize each channel effectively. Those who are on Twitter wont want the same

experience as those on Facebook, Vine or even Google +. This means thattargeting a campaign or encouraging customers to shop with you could be a

minefieldas Disney discovered in a Facebook campaign. But why not let yourcustomers do the social networking for you?

After all, theyre the ones who know what platforms reach their friends andfollowers best. Theyre the ones who know who to target and whos interested. Its

also a lot cheaper to run and manageand easier to handle damage control andsort problems out when things to awry.

Already, some stores are doing this, with Quicksilver in South Africa running aSpaaza My Price promotion. Here, customers are given a discount based upon

their Klout score. The higher your Klout, the bigger the discount and furtherdiscounts can be gained through Tweeting and sharing the news of your purchase.It also works like a loyalty card, racking up points each time you visit.


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Indian retailscapeIndian retail has evolved into a major growth opportunity.

Retailing Industry in India is estimated at INR 15.5 trillion growing atCAGR of 15 to 20 %

Organized Retail accounts for 5-8% which is lowest compared to itspeers in BRIC countriesBrazil (38%), Russia (33%) and China (20%)

The Organized Retail has been growing at 35% CAGR. The retail and wholesale sector in India accounts for approx 14% of GDP In terms of employment, the sector is second largest employer providing

over 10% of all formal jobs.

Supported by strong economic fundamentals.

India has witnessed a robust growth rate of 9% p.a. from 2005 to 2008 andan impressive growth of 6.7% in 2009 despite the global downturn

Government is committed to encourage inclusive growth 72.2% of Indias population resides in rural areas. High agriculture growth

rate offers huge potential Households forming richclass have grown at CAGR of 35% during and

that of Major consuming class have grown at a CAGR of 11 %


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The Indian retail market

Indian market has high complexities in terms of a wide geographic spread anddistinct consumer preferences varying by each region necessitating a need forlocalization even within the geographic zones. India has highest number of outlets

per person (7 per thousand) Indian retail space per capita at 2 sq ft (0.19 m2)/

person is lowest in the world Indian retail density of 6 percent is highest in theworld. 1.8 million Households in India have an annual income of over 45 lakh(US$68,850.00).

While India presents a large market opportunity given the number and increasingpurchasing power of consumers, there are significant challenges as well given thatover 90% of trade is conducted through independent local stores. Challengesinclude: Geographically dispersed population, small ticket sizes, complexdistribution network, and little use of IT systems, limitations of mass media and

existence of counterfeit goods.

A number of merger and acquisitions have begun in Indian retail market. PWCestimates the multi-brand retail market to grow to $220 billion by 2020.
http://en.wikipedia.org/wiki/Indian_rupeehttp://en.wikipedia.org/wiki/Indian_rupee


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Challenges

A McKinsey study claims retail productivity in India is very low compared tointernational peer measures. For example, the labor productivity in Indian retailwas just 6% of the labor productivity in United States in 2010. India's labor

productivity in food retailing is about 5% compared to Brazil's 14%; while India'slabor productivity in non-food retailing is about 8% compared to Poland's 25%.

Total retail employment in India, both organized and unorganized, account forabout 6% of Indian labor work force currently - most of which is unorganized. Thisabout a third of levels in United States and Europe; and about half of levels inother emerging economies. A complete expansion of retail sector to levels and

productivity similar to other emerging economies and developed economies suchas the United States would create over 50 million jobs in India. Training anddevelopment of labor and management for higher retail productivity is expected to

be a challenge.

In November 2011, the Indian government announced relaxation of some rules andthe opening of retail market to competition.


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India retail reforms

Until 2011, Indian central government denied foreign direct investment (FDI) in

multi-brand Indian retail, forbidding foreign groups from any ownership insupermarkets, convenience stores or any retail outlets, to sell multiple productsfrom different brands directly to Indian consumers..

The government of Manmohan Singh, prime minister, announced on 24 November2011 the following:

India will allow foreign groups to own up to 51 per cent in "multi-brandretailers", as supermarkets are known in India, in the most radical pro-liberalisation reform passed by an Indian cabinet in years;

Single brand retailers, such as Apple and Ikea, can own 100 percent of theirIndian stores, up from the previous cap of 51 percent;

Both multi-brand and single brand stores in India will have to source nearlya third of their goods from small and medium-sized Indian suppliers;

All multi-brand and single brand stores in India must confine theiroperations to 53-odd cities with a population over one million, out of some7935 towns and cities in India. It is expected that these stores will now havefull access to over 200 million urban consumers in India;

Multi-brand retailers must have a minimum investment of US$100 millionwith at least half of the amount invested in back end infrastructure, includingcold chains, refrigeration, transportation, packing, sorting and processing toconsiderably reduce the post harvest losses and bring remunerative prices tofarmers;

The opening of retail competition will be within India's federal structure ofgovernment. In other words, the policy is an enabling legal framework forIndia. The states of India have the prerogative to accept it and implement it,or they can decide to not implement it if they so choose. Actualimplementation of policy will be within the parameters of state laws andregulations.

The opening of retail industry to global competition is expected to spur a retailrush to India. It has the potential to transform not only the retailing landscape butalso the nation's ailing infrastructure.,


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SUMMARYClosing thoughts: Be dynamic, maintain focus

Multichannel retail: More than clicks and bricks making use of multiple channelscreate significant opportunities for retailers to grow revenues and better target andinteract with customers. At the same time, company leadership must understandand manage a host of challenges and risks, many of which pertain to operations,data security, fraud prevention and taxes. Retailers that survive and prosper must

be dynamic enough to adapt to evolving multichannel demands and focusedenough to deal with the attendant issues. While the multichannel landscape isalways changing, the path ahead is clear. Retail channels will continue to widen,offering customers more autonomy over their shopping practices. In an uncertain

economy, one of the safest bets for enhancing revenues may be providingconsumers with a comprehensive and effective multichannel experience.

Multi Channel Retailing Assignment

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