Multichannel Retailing Lynda Gamans Poloian

Copyright ©2009 Fairchild Books All rights reserved. No part of this presentation covered by the copyright hereon may be reproduced or used in any form or by any means–graphic, electronic, or mechanical, including photocopying, recording, taping, or information storage and retrieval systems–without written permission of the publisher. ISBN: GST R

Unit I The Road to Multichannel Retailing

Chapter 1 Evolution and Impact

L. Poloian Chapter 1 ©2009 Fairchild Books, A Division of Condé Nast Publications. 5 Multichannel Retailing Defined: Electronic and Mobile Methods E-retailing—Online and other electronic transactions involving goods and services for personal, nonbusiness use E-commerce—Includes consumer and business sectors, encompassing all goods and services sold on the Internet M-commerce—Selling through cell phones and personal digital assistants that are Internet equipped S-commerce—Selling through social media I-commerce---Selling through interactive kiosks

L. Poloian Chapter 1 ©2009 Fairchild Books, A Division of Condé Nast Publications. 6 Multichannel Retailing Defined: Bricks, Slicks, and Clicks Multichannel Retailing Integrates: –Brick-and-mortar stores (bricks) –Direct marketing methods: catalogs and direct mail pieces (slicks) –Online (clicks) –And much more!

L. Poloian Chapter 1 ©2009 Fairchild Books, A Division of Condé Nast Publications. 7 Discerning Channels from Vehicles Channels—Conduits through which sales are transacted: ordering online, making a catalog or store purchase Vehicles—Promotions or other techniques used to reach and inform customers

L. Poloian Chapter 1 ©2009 Fairchild Books, A Division of Condé Nast Publications. 8 Organizational Structures Pure-play— One channel Dual-channel— Two distinct channels Multichannel— Two or more channels (triple play) Electronic spin-offs— Companies that traded through other electronic means before opening online stores Nontransactional sites— Web sites used for information, not commerce

L. Poloian Chapter 1 ©2009 Fairchild Books, A Division of Condé Nast Publications. 9 Why Adopt Multichannel Retailing? Reach more customers Provide customer convenience Compete more effectively Grow the business Balance risk Achieve profitability Expand globally

L. Poloian Chapter 1 ©2009 Fairchild Books, A Division of Condé Nast Publications. 10 Justification for Multichannel Retailing MCR is a strategic imperative for growth Expands customer convenience Adds retail format options Increases customer expenditures

L. Poloian Chapter 1 ©2009 Fairchild Books, A Division of Condé Nast Publications. 11 Roots of Multichannel Retailing Early History and Origins of the Internet : 1960s—U.S. Department of Defense developed ARPAnet 1989—World Wide Web developed in Switzerland Early 1990s—Mosaic (first Web browser) became Netscape Navigator 1994—Amazon.com first major pure-play

L. Poloian Chapter 1 ©2009 Fairchild Books, A Division of Condé Nast Publications. 12 Roots of Multichannel Retailing: Obstacles to Development Economic downturn in and 2010 Bursting of dot-com bubble Scarcity of money for development Battles within companies for control and resources

L. Poloian Chapter 1 ©2009 Fairchild Books, A Division of Condé Nast Publications. 13 Roots of Multichannel Retailing: Current Status Multichannel retailing accepted as the norm Online sales grow more slowly in economic downturns and as the industry matures Business practices become more efficient Customers reached worldwide Cyber Monday?

L. Poloian Chapter 1 ©2009 Fairchild Books, A Division of Condé Nast Publications. 14 Impact of Multichannel Retailing: Worldwide Internet Usage 2000—350 million users 2005—765 million users 2009—1.17 billion users In 2008 the number of Internet users in China (253 million) surpassed the U.S. (220 million) for the first time.* * Sources: China Internet Network Information Center and Neilson Research

L. Poloian Chapter 1 ©2009 Fairchild Books, A Division of Condé Nast Publications. 15 Impact of Multichannel Retailing: Online Performance Measures Revenue growth Gross Margin or Profitability Annual sales Impact of holiday sales periods Other performance measurements: –Click-through rates –Shopping cart abandonment rates –Customer service metrics –Web site design evaluation

L. Poloian Chapter 1 ©2009 Fairchild Books, A Division of Condé Nast Publications. 16 Top Multichannel Retailers: Online Trends In 1999 only 27 of the top 50 online retailers were multichannel In 2009, 41 of the top 50 were multichannel retailers Of the top 10 online retailers only Amazon.com and Newegg.com were pure-play retailers

L. Poloian Chapter 1 ©2009 Fairchild Books, A Division of Condé Nast Publications. 17 Worldwide Internet Usage: Penetration Rate Penetration rate: measures the percentage of the population that purchases a product or service—not simply Internet usage –The highest penetration rates are held by: United States Japan South Korea* *Source: InternetWorldStats.com

L. Poloian Chapter 1 ©2009 Fairchild Books, A Division of Condé Nast Publications. 18 Top 5 E-retailers for 2009 RankCompanyComments 1Amazon.comWell diversified product mix; withstanding economic slump 2StaplesExpects one-third of sales to come from Web 3Office DepotUsing m-commerce features and customer services 4DellUpgrading customer service in very competitive market 5HPAnalyzing customer metrics carefully Source: Internet Retailer. “Top 500 Guide.” 2008 Edition: p86-94

L. Poloian Chapter 1 ©2009 Fairchild Books, A Division of Condé Nast Publications. 19 Lessons Learned from Top Retailers Some perform better than expected Sales may not keep pace with technological advances-Technology is driving retail High costs of doing business change selling channels

L. Poloian Chapter 1 ©2009 Fairchild Books, A Division of Condé Nast Publications. 20 Deployment Strategies Some started as brick-and-mortar retailers and later added online stores (Macy’s) Some began as online retailers then added catalogs and/or stores (Red Envelope) Many catalog companies added brick-and- mortar and online stores (Sears) Depends on the company and its resources

L. Poloian Chapter 1 ©2009 Fairchild Books, A Division of Condé Nast Publications. 21 Factors Shaping the Retail Industry Technological Advances –Hardware, software, gadgets –Social networking –Virtual worlds –Advanced search –Web analytics Customer Dynamics –Aging but active baby boomers –Technology savvy young people –Value consciousness –Empowered Consumer

L. Poloian Chapter 1 ©2009 Fairchild Books, A Division of Condé Nast Publications. 22 Factors Shaping the Retail Industry Industry Consolidation –Mergers –Acquisitions –Larger companies but fewer of them Merchandising Polarity –From luxury to low- budget goods –Assortments seem fragmented –Wide variety of consumers

L. Poloian Chapter 1 ©2009 Fairchild Books, A Division of Condé Nast Publications. 23 Factors Shaping the Retail Industry Supply Chain Initiatives –Shorter merchandise production cycles-QR –Faster time to market –EDI –Greater use of Web for design and production-CAD –Growth of RFID technology Global Retail Expansion –Globalization continues –Business and non-business sectors affected –Many global challenges including the economy

L. Poloian Chapter 1 ©2009 Fairchild Books, A Division of Condé Nast Publications. 24 Factors Shaping the Retail Industry Emergence of China –Major power shift –Chief exporter to the U.S. and the world –Human rights and intellectual property issues –Retail activity and growth –Inflation –Huge disparity between real China and new consumer

L. Poloian Chapter 1 ©2009 Fairchild Books, A Division of Condé Nast Publications. 25 Factors Shaping the Retail Industry Multichannel Emphasis –Significant influence on retailing today –Emphasis on integration across channels –Huge potential if done correctly

L. Poloian Chapter 1 ©2009 Fairchild Books, A Division of Condé Nast Publications. 26 Factors Shaping the Retail Industry Organized Retail Crime –Major negative movement –Involves groups of people engaging in theft and scams –Copyright infringement –Counterfeit –Significant losses to retailers Customer Privacy and Security –Capture and use of personal data concerns customers –Data breaches causing ID theft –Phishing online –Spam

L. Poloian Chapter 1 ©2009 Fairchild Books, A Division of Condé Nast Publications. 27 Factors Shaping the Retail Industry Sustainability –Growing interest in environment by retailers and consumers –Retailers involved in eco- friendly building products and utilities –Concerns about carbon- neutral emissions –Renewable fibers and materials –Sustainable Practices –Index

L. Poloian Chapter 1 ©2009 Fairchild Books, A Division of Condé Nast Publications. 28 Summary Multichannel retailing: creates more value and options for customers fuels growth for proactive retailers Adds management challenges Requires consistency and message integration Platform Integration