5 th Edition PPT 3 1 Chapter 3

5 th Edition PPT 3 -1

Chapter 3 Multi Channel Retailing Mc. Graw-Hill/Irwin Levy/Weitz: PPT 3 -2 Retailing Management, 5/e Copyright © 2004 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

The World of Retailing PPT 3 -3 Introduction to Retailing Types of Retailers Multi-Channel Retailing Customer Buying Behavior

The Multi Channel Retailer PPT 3 -4

Today’s empowered consumers live in a multi-channel world -- Research products online, buy offline, and demand service everywhere Web & Email Consumers buy what they want, when they want, wherever they want • 24 x 7 • Visual Call Center • Convenient • Immediate Brick & Mortar • Touch/Feel • Experience driven Kiosks Customer • Visual • Convenient Pervasive • Immediate • 24 x 7 PPT 3 -5

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 -6

Unique Benefits Provided by Store Channel • Browsing • Touch and feel products • Personal service • Cash payment • Immediate gratification • Entertainment and social interaction PPT 3 -7

Benefits Provided by Catalog Channel Convenience Portability, easily accessible Visual presentation Safety PPT 3 -8

Unique Benefits Provided by Internet Channel • Convenience • Safety • Broad selection • Detailed information • Personalization • Problem-solving information PPT 3 -9

Will Consumers Shop Electronically from Home or Go to the Mall? PPT 3 -10

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 -11

Electronic Channel Influences Shopping Behavior Even though the electronic channel accounts for less than 2% of retail sales, the Internet is used extensively in the buying process PPT 3 -12

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 -13

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 -14

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 -15

Internet Users Across the Globe PPT 3 -16

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 -17

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 -18

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 -19

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 -20

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 -21

Using an Agent to Locate Merchandise PPT 3 -22

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 -23

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 -24

The Knot Solving Your Wedding Problems PPT 3 -25

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 -26

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 -27

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 -28

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 -29

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 -30

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 -31

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” not useful - Gifts Superior presentation of “Touch and Feel” PPT 3 -32 Branding

Why Did So Many e tailers Fail? PPT 3 -33

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 -34

Advantages of Retailers vs. Manufacturers Distribute Merchandise Directly to Customers Provide Assortments Collect and Use Information about Customers Widespread Disintermediation Unlikely PPT 3 -35

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 -36

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 -37

Issues Confronting a Multi Channel Retailer Maintaining Brand Image Across Channels Merchandise Assortment Offered in Each Channel Pricing Across Channels PPT 3 -38

Shopping in the Future PPT 3 -39

Customers Want to Recognized No Matter What Channel they Use Internet Call Center Customers Customer Brick & Mortar Relationship Pervasive Kiosk PPT 3 -40

Integration – Key to Multi Channel Retailing • Create a Seamless • Experience • • • Synchronized & • consistent service • regardless • of channel • • Ordering • • Returns • • Refunds • Make it Easy PPT 3 -41 • Know thy • Customer • • • Needs and • preferences • • • One to One • Marketing • • • Call Center • • • Shopping • Advice • • • Customer • Service • Provide Support

Illustration of Multi-Channel Integration 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 Source: Progressive Grocer, 01 Feb 00; Grocery Headquarters, 01 Feb 00. PPT 3 -42 Consumer places order online for home delivery or store pick up at a later time