CHAPTER 1 2 3 Multichannel Retailing CHAPTER 3

CHAPTER 1 2 3 Multichannel Retailing CHAPTER 3 Retailing Management 8 e © The Mc. Graw-Hill Companies, All rights reserved. 3 -

The World of Retailing CHAPTER 1 2 3 Introduction to the World of Retailing Types of Retailers Multichannel Retailing Customer Buying Behavior Retailing Management 8 e © The Mc. Graw-Hill Companies, All rights reserved. 3 -2

Questions CHAPTER 1 2 3 • What are the unique customer benefits offered by the three retail channels – stores, catalogs, and the Internet? • Why are retailers moving toward using all three channels? • How do multichannel retailers provide more value to their customers? • What are the key success factors in multichannel retailing? • How might technology affect the future shopping experience? Retailing Management 8 e © The Mc. Graw-Hill Companies, All rights reserved. 3 -3

The Multi-Channel Retailer CHAPTER 1 2 3 A retailer that sells merchandise or service through more than one channel. By using a combination of channels, retailers can exploit the unique benefits provided by each channel. Retailer Steve Cole/Getty Images The Mc. Graw-Hill Companies, Inc. /Andrew Resek, photographer Digital Vision / Getty Images Retailing Management 8 e © The Mc. Graw-Hill Companies, All rights reserved. 3 -4

Why are Retailers Using Multiple Channels to Interact with Customers? CHAPTER 1 2 3 • Customer wants to interact in different ways • Each channel offers a unique set of benefits for Customers Retailing Management 8 e © The Mc. Graw-Hill Companies, All rights reserved. 3 -5

Why are Retailers Using Multiple Channels to Interact with Customers? customer store Retailing Management 8 e kiosk catalog CHAPTER 1 2 3 Consumers buy what they want, When they want, Wherever they want Call center Web/E-mail © The Mc. Graw-Hill Companies, All rights reserved. mobile 3 -6

Benefits Provided by Different Channels Retailing Management 8 e © The Mc. Graw-Hill Companies, All rights reserved. CHAPTER 1 2 3 3 -7

Unique Benefits Provided by Store Channel • Browsing • Touching and feeling • Personal service • Cash and credit payment • Entertainment and social interaction • Immediate gratification • Risk Reduction CHAPTER 1 2 3 (c) Brand X Pictures/Punch. Stock Royalty-Free/CORBIS Retailing Management 8 e © The Mc. Graw-Hill Companies, All rights reserved. 3 -8

Benefits Provided by Catalog Channel CHAPTER 1 2 3 Convenience Information Safety Hoby Finn/Getty Images Retailing Management 8 e © The Mc. Graw-Hill Companies, All rights reserved. 3 -9

What’s the Big Deal About Shopping on the Internet? CHAPTER 1 2 3 • $2. 5 Trillion US Retail Sales • $200 Billion Catalog and Direct Sales • $ 4 Billion TV Home Shopping • $ 100 to 150 Billion Internet Retail Sales • Just a drop in the bucket, but growing fast! Retailing Management 8 e © The Mc. Graw-Hill Companies, All rights reserved. 3 - 10

Internet Channel CHAPTER 1 2 3 • Broader Selection • More and Better Information to Evaluate Merchandise • Drill Down as Much as You Want • Full motion Video • Personalization • Information is tailored to Individual consumers to help them make quicker and better purchase decisions • Fred is a Super Retail Salesperson • Customized Information -- Side By Side Comparisons, Full Motion Video • Try It On Virtually • Information for Solving Problems, Not Just Merchandise Characteristics • Virtual Communities Retailing Management 8 e © The Mc. Graw-Hill Companies, All rights reserved. 3 - 11

Benefits of Multichannel Retailing CHAPTER 1 2 3 • Traditional store-based and catalog retailers are placing more emphasis on their electronic channels and evolving into multichannel retailers. • E-channel gives a way to overcome limitations of existing format • With electronic channel, retailers can reach out to new markets • Builds share of wallet • E-channel enables retailers to give insights into customers’ shopping behaviors Retailing Management 8 e © The Mc. Graw-Hill Companies, All rights reserved. 3 - 12

Benefits of Multichannel Retailing CHAPTER 1 2 3 Overcoming the Limitations of an Existing Format Increased Assortments Retailing Management 8 e Low-Cost, Consistent Execution © The Mc. Graw-Hill Companies, All rights reserved. Current Information 3 - 13

Benefits of Multichannel Retailing CHAPTER 1 2 3 • Gaining Insights into Consumer Shopping Behavior • Expanding Market Presence • Building a Strategic Advantage Retailing Management 8 e © The Mc. Graw-Hill Companies, All rights reserved. 3 - 14

Why are store-based retailers evolving into multi-channel retailers? CHAPTER 1 2 3 • Sales through an electronic channel are growing at over 20% per year • Adding an electronic channel creates immediate possession utility • Multi-channel retailers can attract more customers and satisfy existing customers better • The growth of sales in stores is declining Retailing Management 8 e © The Mc. Graw-Hill Companies, All rights reserved. 3 - 15

Will Electronic Channel’s Low Search Cost Increase Price Competition? CHAPTER 1 2 3 • Conventional Wisdom • Greater Comparison Shopping • Offerings Easily Compared on Price • Lower Search Costs => More Emphasis on Price • Empirical Evidence • Substantial Price Dispersion • Lower Search Costs for Quality Information=> Less Price Sensitivity • Lower Search Costs Lead to Better Decisions Retailing Management 8 e © The Mc. Graw-Hill Companies, All rights reserved. 3 - 16

Will Manufacturers Bypass Retailers and Sell Directly to Consumers? CHAPTER 1 2 3 • Advantages of Retailers vs. Manufacturers • Distribute Merchandise Directly to Customers • Provide Assortments • Collect and Use Information about Customers Widespread Disintermediation Unlikely Retailing Management 8 e © The Mc. Graw-Hill Companies, All rights reserved. 3 - 17

Challenges of Effective Multichannel Retailing CHAPTER 1 2 3 • Integrated Shopping Experience • Communicate with customers anytime, anywhere through multiple channels • Website, Store, Kiosks, Handheld Devices • Integrating legacy systems for seamless customer interface Retailing Management 8 e © The Mc. Graw-Hill Companies, All rights reserved. 3 - 18

Challenges of Effective Multichannel Retailing CHAPTER 1 2 3 Supporting M -Commerce Organizing for Multichannel Retailing Centralized Customer Database Brand Image Merchandise assortment Pricing Reduction of Channel Migration Retailing Management 8 e © The Mc. Graw-Hill Companies, All rights reserved. 3 - 19

Today’s empowered consumers live in a multi-channel world – research products online, buy offline, and demand service everywhere CHAPTER 1 2 3 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 Handheld Devices • Immediate • 24 x 7 Retailing Management, 8 e 8/e © The Mc. Graw-Hill Companies, Allrightsreserved. 31 - 20

Shopping in the Future Retailing Management 8 e © The Mc. Graw-Hill Companies, All rights reserved. CHAPTER 1 2 3 3 - 21

Shopping Experience: Personalization Potential Retailing Management 8 e © The Mc. Graw-Hill Companies, All rights reserved. CHAPTER 1 2 3 3 - 22