Web, Nonstore-Based, and Other Forms of Nontraditional Retailing Chapter 6 Web, Nonstore-Based, and Other Forms of Nontraditional Retailing RETAIL MANAGEMENT: A STRATEGIC APPROACH 11th Edition BERMAN EVANS Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall 1 1

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 2 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall 2

Chapter Objectives (cont.) 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 3 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall 3

Figure 6-1a: Approaches to Retailing Channels 4 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall 4

Figure 6-1b: Approaches to Retailing Channels 5 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall 5

Nonstore Retailing Retailing strategy that is not store-based Exceeds $410 billion annually 80% comes from direct marketing Web-based retailing is the fastest- growing area Web retailing expected to reach $180 annually as of 2012 6 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall 6

Nontraditional Retailing Nontraditional retailing also includes formats that do not fit into store and nonstore-based categories: Video kiosks Airport retailing 7 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall 7

Direct Marketing Customer is initially exposed to a good or service through a non-personal medium and then orders by mail, phone, fax, or computer Annual U.S. sales exceed $325 billion (including the Web) Other leading countries include Japan Germany Great Britain France Italy 8 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall 8

Characteristics of Direct Marketing Customers Married Upper middle class 35-50 years old Desire convenience, unique items, good prices Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall 9

Strategic Business Advantages of Direct Marketing Reduced costs Lower prices Large geographic coverage Convenient to customers Ability to pinpoint customer segments Ability to eliminate sales tax for some Ability to supplement regular business without additional outlets 10 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall 10

Strategic Business Limitations of Direct Marketing Products often cannot be examined prior to purchase Costs may be underestimated Response rates to catalogs under 10% Clutter exists Long lead time required Industry reputation sometimes negative 11 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall 11

Data-Base Retailing Collection, storage, and usage of relevant customer information name address background shopping interests purchase behavior Observation of 80-20 rule 12 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall 12

Emerging Trends Evolving activities Changing customer lifestyles Increasing competition Increasing usage of dual distribution channels Changing media roles, technological advances, and global penetration 13 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall 13

Selection Factors by Customers 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 14 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall 14

Figure 6-4: Executing a Direct Marketing Strategy 15 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall 15

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 16 16

Outcome Measures Overall response rate Average purchase amount Sales volume by product category Value of list brokers 17 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall 17

Direct Selling Direct selling includes personal contact with consumers in their homes (and other nonstore locations such as offices) and phone solicitations initiated by retailer. Annual sales of $31 billion in the U.S., where 15 million people are employed (more than 80 percent part-time). Annual foreign revenues of $85 billion, generated by 48 million salespeople. 18 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall 18

Table 6-1: U.S. Direct Selling Industry 19

Vending Machines Vending machines are a cash- or card-operated retailing format that sells goods and services. Eliminates the use of sales personnel and allows 24-hour sales. Machines placed wherever convenient for consumers. 95 percent of the $50 billion in annual U.S. vending machine sales involve hot/cold beverages and food items. 20 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall 20

Emergence of World Wide Web The World Wide Web (Web) is a way to access information on the Internet. People work with easy-to-use Web addresses (sites) and pages. Web users see words, charts, pictures, and video while hearing audio. Both “Internet” and “World Wide” Web convey the same central theme: online interactive retailing. 21 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall 21

The Role of the Web Project a retail presence Enhance image Generate sales Reach geographically-dispersed customers Provide information to customers Promote new products Demonstrate new product benefits 22 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall 22

The Role of the Web (cont.) Provide customer service (e.g. E-mail) Be more “personal” with consumers Conduct a retail business efficiently Obtain customer feedback Promote special offers Describe employment opportunities Present information to potential investors, franchisees, and the media 23 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall 23

Figure 6-6: Web-Based Retail Sales Projections 24 24

Figure 6-8: Five Stages of Developing a Retail Web Presence 25 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall 25

Figure 6-9: Checklist of Retailer Decisions for the Web 26 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall 26

Web Strengths Shopping Online Using the Web selection information prices convenience fun Using the Web information entertainment interactive communications 27 27

Reasons NOT to Shop Online Lack of trust Fear Lack of security Lack of personal communication 28 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall 28

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 engine Use customer information 29 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall 29

Video Kiosks A video kiosk is a freestanding, interactive, electronic computer terminal that displays products and related information. Some kiosks are located in stores to enhance customer service; others let consumers place orders. There are 2.2 million video kiosks in use throughout the world, nearly 1 million of which are Internet-connected. 30 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall 30

Airport Retailing Large group of prospective shoppers Captive audience Strong sales-per-square-foot of retail space Strong sales of gift and travel items Difficulty in replenishment Longer operating hours Duty-free shopping possible 31 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall 31

Figure 6-13: Airport Retailing and Starbucks 32 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall 32

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall