PPT 3-1 5 th Edition. PPT 3-2 Chapter 3 Multi-Channel Retailing McGraw-Hill/Irwin Levy/Weitz: Retailing Management, 5/e Copyright © 2004 by The McGraw-Hill.

PPT 3-1

5th Edition5th Edition

PPT 3-2

Chapter 3

Multi-Channel RetailingMulti-Channel Retailing

McGraw-Hill/IrwinLevy/Weitz: Retailing Management, 5/e Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.

PPT 3-3

The World of Retailing

Introduction to Retailing Types of Retailers

Multi-Channel Retailing

Customer Buying Behavior

PPT 3-4

The Multi-Channel Retailer

Retailer

PPT 3-5

Customer

Today’s empowered consumers live in a multi-channel world -- Research products online, buy offline, and demand service everywhere

Web & Email • 24x7 • Visual

Call Center • Convenient • Immediate

Kiosks • Visual • Convenient

Pervasive • Immediate • 24x7

Brick & Mortar • Touch/Feel • Experience driven

Consumers buy what they want, when they want, wherever they want

PPT 3-6

Why are Retailers Using Multiple Channels to Interact with Customers?

• Customer Want to interact in different ways

• Each channel offers a unique set of benefits for Customers

PPT 3-7

Unique Benefits Provided by Store Channel

• Browsing

• Touch and feel products

• Personal service

• Cash payment

• Immediate gratification

• Entertainment and social interaction

PPT 3-8

Benefits Provided by Catalog Channel

Convenience

Portability, easily accessible

Visual presentation

Safety

PPT 3-9

Unique Benefits Provided by Internet Channel

• Convenience

• Safety

• Broad selection

• Detailed information

• Personalization

• Problem-solving information

PPT 3-10

Will Consumers Shop

Electronically from Home

or

Go to the Mall?

PPT 3-11

What’s the Big Deal About Shopping on the Internet?

$2.5 Trillion US Retail Sales

$200 Billion Catalog and Direct Sales

$ 4 Billion TV Home Shopping

$ 50 Billion Internet Retailing

Just a Drop in the Bucket, But Growing Fast!

PPT 3-12

Electronic Channel Influences Shopping Behavior

0102030405060708090

100

In-StoreVisit

Internetfrom Home

Mail-OrderCatalog

Television Kiosk Pervasive

Findout about newproductsSearch for productinformationCompare and EvaluateProductsPurchase and Pay

Even though the electronic channel accounts for less than 2% of retail sales, the Internet is used extensively in the buying process

PPT 3-13

Positive Outlook for Future

Younger people are growing up with computers view them as an appliance

55% of U.S. households have Internet access now and more have access at work

Women use the Internet almost as much as men now

40% of people buying cars go to the Internet for info before seeing a dealer

PPT 3-14

Impediments to Shopping On-Line

Technological concerns are becoming less important

– Access to Internet

– Bandwidth

– Privacy, Security concerns

Are the benefits of shopping on-line greater

than the benefits of going to a store?

PPT 3-15

Factors Affecting the Diffusion of an Innovation

• Ease with which the innovation can be tried out

On-line access

• Perceived risks of adoption

Security, Privacy

• Perceived benefits compared to present alternatives (going to store or buying from catalogs)

PPT 3-16

Internet Users Across the Globe

PPT 3-17

Illustration - Judy Jamison - Part 1

Judy Jamison sits in front of her home electronic center reviewing her engagement calendar displayed on her TV screen. She sees that she has accepted an invitation to a formal cocktail party on Friday night and decides to buy a new dress for the occasion. She switches to her personal electronic shopper, FRED, and initiates the following exchange:

FRED: Do you wish to browse, go to a specific store, or buy a specific item?

Judy: Specific item.

FRED: Type of item?

Judy: Black dress.

FRED: Occasion? (menu appears on screen)

Judy: Formal cocktail party

PPT 3-18

Illustration - Judy Jamison - Part 2

FRED: Price range? (menu appears)

Judy: $300 $500

FRED: 497 items have been identified. How many do you want to review?

Judy: 5

Five pictures of Judy in each dress appear on the screen with the price, brand name, and the IHS retailer selling it listed beneath each one. Judy clicks on one of the dresses and it is enlarged on the screen. Another click and Judy views the dress from different angles. Another click and specifications such as fabric and laundering instructions appear. Judy repeats this routine with each dress. She selects the one she finds most appealing. FRED knows her measurements and picks the size that fits her best.

PPT 3-19

Illustration - Judy Jamison - Part 3

FRED: How would you like to pay for this? (menu appears)

Judy: American Express

FRED: Nieman Marcus [the firm selling the dress Judy selected] suggests a Xie scarf and Koslow belt to compliment the

dress.

[Judy clicks on the items and they appear on the screen. Judy inspects these items as she inspected the dresses. She decides to purchase both accessories. FRED then asks Judy about delivery. Judy selects two day delivery at a cost of $5.00]

FRED: Just a reminder. You have not purchased hosiery in 30 days. Do you wish to reorder at this time?

Judy: Yes

FRED: Same shades?

Judy: Yes

PPT 3-20

Why Do People Patronize a Retailer?

Merchandise Assortments

Service

Convenience

Information to make good selections

Price - Total cost to customer

Go to store, find right merchandise, return merchandise

Entertainment

Social interaction

PPT 3-21

Benefits of Electronic Channel

Increased Assortment

More Information to Evaluate Merchandise

Drill Down as Much as You Want

Full motion Video

Personalization

Fred, the Super Sales Associate

Try It On Virtually

Information for Solving Problems, Not Just Merchandise Characteristics

Virtual Communities

PPT 3-22

Using an Agent to Locate Merchandise

PPT 3-23

Virtual Communities

• John Hagel III and Arthur G. Armstrong, Net Gain: Expanding Markets Through Virtual Communities. Boston: Harvard Business School Press, 1998

• Definition: Virtual community is a network of members sharing common interests that interact with each other electronically.

PPT 3-24

Virtual Communities

Virtual community is a network of members sharing common interests that interact with each other electronically.

Examples:

IVillage - Women

Garden.Com - Gardeners

Ibelieve.com

PPT 3-25

The Knot -- Solving Your Wedding Problems

PPT 3-26

Value Proposition to Members

Full range of resources available to solve problem or satisfy from one source.

Integrate content and communication maximizing value of the available resources

Generation and dissemination of member generated information -- increases quality, breadth and depth of information.

PPT 3-27

Value Proposition for Members

Meaningful personal relationships -- Opportunity to interaction with other people with common interests draws people to community.

Fantasy and Entertainment

Access to competing vendors and publishers

PPT 3-28

Value Proposition for Commercial Organizer

• Reduce cost of locating and targeting customers

• Reduce cost of motivating customers to make purchase decisions

• Opportunity for tailoring products, services,

• Lower capital investment – don’t have to build store fronts.

• Broader geographic reach

PPT 3-29

Benefits for Community Manager

• Strengthen Brand Name, Reputation

• Build Customer Relationships

• Extend Database of Potential Customers

• Revenue Generation– Sell Merchandise

– Sell Services to Members

• Membership fees (Annual Charge for Access)

• Usage fee (Downloads, Time of Access)

• Advertising (Charge Advertisers)

PPT 3-30

Sources of Revenue

Subscription fees – fixed monthly charge

Usage fee – charge based on usage

Membership fees

Content delivery fees – charge to download information

Service fee – notification fee

Advertising

Transaction commissions

Sales of membership list or access to members

PPT 3-31

Who Is Best Suited to Organize a Virtual Community?

Concerned Consumers

Content Providers - Vertical Publications

Suppliers

Retailers

Offering Competing Products

Unbiased, Good Reputation

Know How to Run a Business Selling to Consumers -- Primary Revenue Source

PPT 3-32

What Merchandise Will Be Sold Successfully Over the Internet

“Look and See” attributes vs. “Touch and Feel” attributes (?)

Degree to which information can be used to predict satisfaction prior to purchase

Gifts

Services

Might not need to “Touch and Feel”

“Touch and Feel” not useful - Gifts

Superior presentation of “Touch and Feel”

Branding

PPT 3-33

Why Did So Many e-tailers Fail?

Pure E-Tailer

Catalog Retailers

Store-Based Retailers

Vendors

Assortments Limited Limited Excellent Poor

Fulfillment Poor Excellent Good Poor

Customer Information

Poor Excellent Good Poor

Unique Merchandise

Poor Good Good Excellent

Brand Name Poor Some Excellent

Some Excellent

Some Excellent

PPT 3-34

Store-based Retailers vs. Electronic Retail Entrepreneurs

Knowledge of Retailing

Assortment Planning

Distribution Systems

Reputation

Customer Database

Convenient Location for Picking Up, Returning Merchandise, Warranty Service and Installation

Vendor Relationships

PPT 3-35

Advantages of Retailers vs. Manufacturers

Distribute Merchandise Directly to Customers

Provide Assortments

Collect and Use Information about Customers

Widespread Disintermediation Unlikely

PPT 3-36

Summary

• Present Electronic Retailing Does Not Reflect the Future Potential -- Electronic Retailing Will Attract a Significant Segment --Much More than Catalogs

• Penetration of Electronic Retailing Will Be A Function of the Degree To Which Retailers Take Advantage of the Unique Properties of the Internet -Personalization and Interactivity

• Search Agents Are Critical to Provide Consumer Benefits

• Store-Based Retailers Are Well Positioned to Exploit This Opportunity But Might Not

PPT 3-37

Reasons for Becoming a Multi-Channel Retailer

-Increase Share of Wallet

-Overcome Limitations of Existing Format

-Expand Market

-Leverage Existing Assets

-Brand Name, Inventory, Customer Database

-Develop Insights in Customer Shopping Behavior

PPT 3-38

Issues Confronting a Multi-Channel Retailer

Maintaining Brand Image Across Channels

Merchandise Assortment Offered in Each Channel

Pricing Across Channels

PPT 3-39

Shopping in the Future

PPT 3-40

Customers Want to Recognized No Matter What Channel they Use

Kiosk

Internet

Pervasive

Call Center

CustomerRelationshipBrick & Mortar

Customers

PPT 3-41

Integration – Key to Multi-Channel Retailing

•Create a Seamless •Experience

•Make it Easy •Provide Support

•Know thy •Customer

••• Ordering ••• Returns••• Refunds

•• •Call Center•• •Shopping

•Advice•• •Customer

•Service

•• •Needs and•preferences

•• •One to One•Marketing

•• •Synchronized &•consistent service•regardless•of channel

PPT 3-42

Source: Progressive Grocer, 01 Feb 00; Grocery Headquarters, 01 Feb 00.

Consumer does not find desired item in the store.

Consumer goes to kiosk to search for product

Kiosk links to chain’s web-site allowing consumers to find and purchase item

Consumer places order online for home delivery or store pick-up at a later time

Illustration of Multi-Channel Integration