1. Multi-Channel Retailing
Chapter 3
Multi-Channel Retailing

2. The World of Retailing Introduction to Retailing Types of Retailers
Customer Buying Behavior
Multi-Channel Retailing

3. The Multi-Channel Retailer
Steve Cole/Getty Images
Retailer
Digital Vision / Getty Images
The McGraw-Hill Companies, Inc./Andrew Resek, photographer

4. 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

5. Benefits Provided by Different Channels

6. Unique Benefits Provided by Store Channel
Browsing
Touch and feel products
Personal service
Cash payment
Immediate gratification
Entertainment and social interaction
Risk Reduction
(c) Brand X Pictures/PunchStock
Royalty-Free/CORBIS

7. Benefits Provided by Catalog Channel
Convenience
Portability, easily accessible
Visual presentation
Safety
Hoby Finn/Getty Images

8. Unique Benefits Provided by Internet Channel
Convenience
Safety
Broad selection
Detailed information
Personalization
Virtual communities
Problem-solving information
More info to evaluate merchandise
The McGraw-Hill Companies, Inc./Jill Braaten, photographer

9. Problem Solution Benefits Offered By Electronic Channel
Bundling Information, Services, and Products
Examples
iVillage
The Wedding Channel, The Knot
What are the benefits consumers get from shopping on the net? First convenience and security -- but all non store retail format offer this. Second, consumers can shop the world from their homes and see a lot more alternatives. But this is really not that great a benefit. Its like giving a buyer more data in computer print out. The benefit is converting the data into a limited amount of information that the consumer or manager can use. The internet in conjunctions with agents like FRED has the capability of doing this conversion of data into information better than other retail formats.
If Fred was a retailer’s agent, he would be like my aunt molly.
Bonwit Teller, designer dress salon in Clevelend. Knew the what each for her clients wanted to hide and show off, what colors and styles, like. New shipment came in take to their home.
Another example would be providing consumers with Consumer Report like side by side comparisons. But the rows in the table would be the attributes important ot the specific consumer and the columns would be items considered
Conclusion internet can provide important benefits 11

10. Virtual Communities
People who seek information, products and services communicate with each other regarding specific issues
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11. Virtual Communities
Virtual community is a network of members sharing common interests that interact with each other electronically.
Examples:
IVillage - Women
Garden.Com - Gardeners
Flypaper.com – talks about fashion
Cafeutne.org – social issues

12. Personalization Potential Of Electronic Channel

13. Customization Benefits Offered By Electronic Channel
Information 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
What are the benefits consumers get from shopping on the net? First convenience and security -- but all non store retail format offer this. Second, consumers can shop the world from their homes and see a lot more alternatives. But this is really not that great a benefit. Its like giving a buyer more data in computer print out. The benefit is converting the data into a limited amount of information that the consumer or manager can use. The internet in conjunctions with agents like FRED has the capability of doing this conversion of data into information better than other retail formats.
If Fred was a retailer’s agent, he would be like my aunt molly.
Bonwit Teller, designer dress salon in Clevelend. Knew the what each for her clients wanted to hide and show off, what colors and styles, like. New shipment came in take to their home.
Another example would be providing consumers with Consumer Report like side by side comparisons. But the rows in the table would be the attributes important ot the specific consumer and the columns would be items considered
Conclusion internet can provide important benefits 11

14. Does The Electronic Channel Have Lower Costs Than Stores?
Bricks and Mortar, Salespeople
Attracting Customers to Store
Distribution Centers
Restocking Returned Merchandise
Electronic Retailers
Building,Refreshing Web Site
Attracting Customers to Web Site
Picking, Packing, Mailing Small Orders to Home
Restocking Returned Merchandise

15. Will Electronic Channel’s Low Search Cost Increase Price Competition?
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

16. What People Buy Over the Internet
Travel
PC/Electronics/Toys
Books/Software
Apparel
Home & Garden
Jewelry & Watches

17. What Merchandise Will Be Sold Successfully Through Electronic Channel?
“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”
“Touch and Feel” not useful - Gifts
Superior presentation of “Touch and Feel”
Branding

18. Types of Attributes
Search: Can be determined prior to purchase, consumption. (e.g., price, brand)
Experience: Cannot determine prior to purchase, consumption. (e.g., taste, comfort)
Credence: Cannot be directly determined by the average consumer. (e.g., health benefits, technical specifications)

19. How to Sell Over the Internet …and eliminate returns
Even when retailers provide “touch and feel information” retailers still experience 10% returns of purchases …20% on the electronic channel.
National brands provide a consistent experience for customers to overcome not being able to touch and feel.
The McGraw-Hill Companies, Inc./Jill Braaten, photographer

20. How Can The Electronic Channel Overcome Limitations?
Use technology to convert “touch and feel” information into “look and see” information
3-D Imaging
Zoom Technology
Live Chat
360 Degree Viewing
Virtual Models
Technology increases sales

21. Perceived Risks of Electronic Shopping
Don Farrall/Getty Images
Security of credit card transaction – security problems have not arisen in actual usage
Potential privacy violations – consumers are concerned about retailers collecting their personal information

22. When The Electronic Channel Provides Superior Benefits
GIFTS
Saves time
Saves effort in packing
Saves effort in delivery
SERVICES
No Shipping Problems
Examples
Travel websites
Banking
Newspapers
Janis Christie/Getty Images

23. Resources Needed to Compete Effectively in Internet Retailing
Exciting, Easy to Use Web Site
Management Information Systems
Order processing and status
Customer database
Personalization software
But These Resources Were Not Enough!

24. Resources Needed to Compete Effectively in Internet Retailing
Retailing Skills
Managing inventory
Editing assortment
Efficient Fulfillment Systems
Significant costs - last mile
Picking and packing individual orders
Handling returns - reverse distribution

25. Resources Needed to Compete Effectively in Internet Retailing
Strong Brand Name and Image
Build traffic
Reduce customer perceived risk
Complementary Merchandise
One stop shopping
Lower shipping costs
Availability of Customer Information
Tailored presentations - personalization

26. Resources Possessed by Different Firm Types

27. Why did Electronic-only Retailers Fail?
They had skills in web design
They had skills in systems to manage transactions
They did not have skills in brand recognition
They did not have skills necessary to build consumer trust
They did not have skills to build assortments, manage inventory and fulfill small orders to homes
Digital Vision/Getty Images

28. Resources Possessed by Different Firm Types

29. Catalog Retailers can Add Electronic Channel Easily
Ready to take orders
Able to pack merchandise
Able to deliver
Able to handle returned merchandise
Already have a database
Visual merchandise for catalog is the same for electronic
Steve Cole/Getty Images

30. Resources Possessed by Different Firm Types

31. 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
Royalty-Free/CORBIS

32. Why did Walgreens Beat Out The Electronic Drugstore Chains?
Three thousand conveniently located stores in the US with drive-through windows for picking up prescriptions and merchandise
A distribution system in place for picking, packing and shipping prescription pharmaceuticals and merchandise presently ordered by phone
A strong brand reputation for being trustworthy and helping customers on health-related decisions
Agreements in places with third-party payers (HMOs and insurance companies) to accept and provide pharmaceutical benefits for its customers

33. Resources Possessed by Different Firm Types

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

35. Ecommerce Myths Low Cost of Entry
Overestimate Importance of Technology, Under Estimated Need for Traditional Resources
First Mover Wins
Gets Rid of the Middleman

36. Evolution Toward Multi-channel Retailing
Electronic 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

37. Overcoming Existing Format
Size of the store is the greatest constraint for stores
By blending store with internet-enabled kiosks, retailers expand assortments offered to shoppers.
Store based retailers face inconsistent execution
Kiosks can be used by both sales associates and customers for up-to-date product information, stock information and price reduction on clearances.

38. Percentage of Cross Channel Shoppers

39. Capabilities for Multi-Channel Retailing
To effectively operate and realize the benefits of multi-channel retailing, firms need to have skills in:
Developing assortments and managing inventory
Managing employees in distant locations
Distribute merchandise efficiently from DCs to stores
Present merchandise in catalogs
Present merchandise on websites
Process orders electronically
Efficient distribution of individual orders to homes
Operate information systems for all channels

40. Capabilities for Multi-Channel Retailing

41. Multi-channel Services and Features

42. Issues Confronting a Multi-Channel Retailer
Maintaining Brand Image Across Channels
Merchandise Assortment Offered in Each Channel
Pricing Across Channels

43. Shopping in the Future

44. Integration – Key to Multi-Channel Retailing