Web, Nonstore-Based, and Other Forms of Nontraditional Retailing Chapter 6 Web, Nonstore-Based, and Other Forms of Nontraditional Retailing

Chapter Objectives To contrast single-channel and multi-channel retailing and their integration To look at the characteristics and strategies of the major nonstore retail institutions, especially direct marketing and direct selling To consider to role and scope of web retailing To discuss other nontraditional forms of retailing such as auctions

Figure 6-1a,b: Approaches to Retailing Channels

Integrating Store and Non-Store Retailing In general, store retailing is saturated, and much of the retail growth potential lies in multi and cross-channel opportunities. While retail diversification provides some growth potential, many existing retailers are struggling to integrate existing brick-and-mortar operations with non-store options. Some of these non-traditional forms of retailing are quite new, such as virtual retailing, and others have been around for some time, such as catalog retailing. The convergence of several trends, notably internet usage and technological advances, further impels the expansion of non-store retailing forms/experience. Fall 2007 Preview Catalog Integrating Store and Non-Store Retailing

Nontraditional Retailing Nonstore Retailing Retailing strategy that is not store-based, especially direct marketing and direct selling It exceeds $375 billion annually 80% comes from direct marketing Web-based is fastest growing Nontraditional Retailing Nontraditional retailing also includes formats that do not fit into the store and nonstore-based categories: Video kiosks Auctions Airport retailing Fairs, etc.

Characteristics of Direct Marketing Customers Customer is first exposed to a good or service through a nonpersonal medium and then orders by mail, phone, fax, or computer Annual U.S. sales exceed $300 billion FTC Telemarketing Sales Rule Characteristics of Direct Marketing Customers - Married - Desire convenience, - Upper middle class unique items, - 35-50 years old good prices Strategic Business Advantages of Direct Marketing Strategic Business Limitations 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 Products 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

Data-Base Retailing Costs In almost all situations, Customer Relationship Management (CRM) presupposes that the dialogue was initiated by your customer. You respond to the customer, attempting to turn the dialogue into a relationship-building (and selling) opportunity. It’'s usually the right thing to do, but it’s an entirely reactive process. The customer is pulling information from you. Successful retailers do not sit idly and wait for customers to initiate selling opportunities. It doesn't happen often enough to drive growth. At its heart, retail marketing is a proactive exercise. That means you need to push your sales offer to them. It is the integration of proactive database marketing with reactive customer relationship management that makes the one-to-one connection rewarding for both of you. Your customers respond to an offer when you make it, and you respond to their needs when they ask. When the two converge, the result is a shared experience that completes the marketing cycle. Being successful in the marketplace is not a matter of choosing whether to be a relationship marketer or a database marketer. In almost all situations, how well your overall marketing works is largely a function of how well you fit the two together. Collection, storage, and usage of relevant customer information name address background shopping interests purchase behavior Observation of 80-20 rule Next Generation Data-Base Marketing It is important to understand that database marketing has evolved to a point today where many companies are able to access and sift through large and complex volumes of information to make more informed decisions about the means and costs of their customer marketing investments. Data-Base marketing success needs answers to questions like: Which customers do we target for a particular promotion? How do we tailor our message for that particular customer group? Which customers are most valuable over the life of the relationship? What distinguishes our best customers? How do we find/develop more customer relationships of this kind? Data-Base Retailing Costs

Selection Factors by Customers Emerging Trends 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 Evolving activities Changing customer lifestyles Increasing competition Increasing usage of dual distribution channels Changing media roles, technological advances, and global penetration Figure 6-4: Executing a Direct Marketing Strategy

Media Selection Outcome Measures Advertising Trends 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 Advertising Trends Outcome Measures Overall Response Rate Average Purchase Amount Sales Volume by Product Category Value of List Brokers

Table 6-1: Snapshot of U.S. Direct Selling Industry Direct selling involves the person-to-person sale of a product or service in a location other than a retail store. Table 6-1: Snapshot of U.S. Direct Selling Industry Door-to-Door Multi-Level Marketing Party-Plan Selling Consultative Selling TSG Direct Selling Selling fish in Laos http://www.sec.gov/answers/pyramid.htm

Figure 6-8: Five Stages of Developing a Retail Web Presence 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 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 Figure 6-8: Five Stages of Developing a Retail Web Presence 1. Brochure Web Site 2. Commerce Web Site 3. Integrated Web Site 4. The ‘Webified’ Store Figure 6-6: Web-Based Retail Sales Projections 5. Site Integration

Lack of personal communication Web Strengths Recommendations for Web Retailers Using the Web information entertainment interactive communications 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 Shopping Online selection prices convenience fun Reasons NOT to Shop Online Trust Fear Lack of security Lack of personal communication

Non-Traditional Retailing Vending Machines Video Kiosks Airport & Border Retailing Auctions Fairs et al. 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 Structure Value and Ownership -English -Commodity -Dutch -Collectible -Japanese -One of a kind Street Vending Chapter 6 Discussion Questions: 7, 8