1. RETAILING
MANAGEMENT
RETAILING
MANAGEMENT
5th Edition

2. Multi-Channel Retailing
Chapter 3
Multi-Channel Retailing
McGraw-Hill/Irwin
Levy/Weitz: Retailing Management, 5/e
Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.

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

4. The Multi-Channel Retailer

5. Today’s empowered consumers live in a multi-channel world -- Research products online, buy offline, and demand service everywhere
Web &
• 24x7
• Visual
Consumers buy what they want, when they want, wherever they want
Call Center
• Convenient
• Immediate
Brick & Mortar
• Touch/Feel
• Experience driven
First, there are major changes in customer buying behavior.
I may want to buy a product at 10pm, through my Web browser, or you may want to buy through a call center, or you may want to buy by visiting with a field sales professional or local reseller.
I also may want to work across multiple channels, to start my purchase over the Web, then later contact the call center, and finally close the deal with a field sales representatives in my office.
Kiosks
• Visual
• Convenient
Customer
Pervasive
• Immediate
• 24x7

6. 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

7. Unique Benefits Provided by Store Channel
Browsing
Touch and feel products
Personal service
Cash payment
Immediate gratification
Entertainment and social interaction

8. Benefits Provided by Catalog Channel
Convenience
Portability, easily accessible
Visual presentation
Safety

9. Unique Benefits Provided by Internet Channel
Convenience
Safety
Broad selection
Detailed information
Personalization
Problem-solving information

10. Electronically from Home
Will Consumers Shop
Electronically from Home or
Go to the Mall?

11. What’s the Big Deal About Shopping on the Internet?
$2.5 Trillion US Retail Sales
$200 Billion Catalog and Direct Sales
$ 4 Billion TV Home Shopping
$ 50 Billion Internet Retailing
Just a Drop in the Bucket, But Growing Fast!

12. Electronic Channel Influences Shopping Behavior
Even though the electronic channel accounts for less than 2% of retail sales, the Internet is used extensively in the buying process

13. Positive Outlook for Future
Younger people are growing up with computers view them as an appliance
55% of U.S. households have Internet access now and more have access at work
Women use the Internet almost as much as men now
40% of people buying cars go to the Internet for info before seeing a dealer

14. Impediments to Shopping On-Line
Technological concerns are becoming less important
Access to Internet
Bandwidth
Privacy, Security concerns
Are the benefits of shopping on-line greater
than the benefits of going to a store?

15. Factors Affecting the Diffusion of an Innovation
Ease with which the innovation can be tried out
On-line access
Perceived risks of adoption
Security, Privacy
Perceived benefits compared to present alternatives (going to store or buying from catalogs)

16. Internet Users Across the Globe

17. Illustration - Judy Jamison - Part 1
Judy Jamison sits in front of her home electronic center reviewing her engagement calendar displayed on her TV screen. She sees that she has accepted an invitation to a formal cocktail party on Friday night and decides to buy a new dress for the occasion. She switches to her personal electronic shopper, FRED, and initiates the following exchange:
FRED: Do you wish to browse, go to a specific store, or buy a specific item?
Judy: Specific item.
FRED: Type of item?
Judy: Black dress.
FRED: Occasion? (menu appears on screen)
Judy: Formal cocktail party

18. Illustration - Judy Jamison - Part 2
FRED: Price range? (menu appears)
Judy: $300 $500
FRED: 497 items have been identified. How many do you want to review?
Judy: 5
Five pictures of Judy in each dress appear on the screen with the price, brand name, and the IHS retailer selling it listed beneath each one. Judy clicks on one of the dresses and it is enlarged on the screen. Another click and Judy views the dress from different angles. Another click and specifications such as fabric and laundering instructions appear. Judy repeats this routine with each dress. She selects the one she finds most appealing. FRED knows her measurements and picks the size that fits her best.

19. Illustration - Judy Jamison - Part 3
FRED: How would you like to pay for this? (menu appears)
Judy: American Express
FRED: Nieman Marcus [the firm selling the dress Judy selected] suggests a Xie scarf and Koslow belt to compliment the dress.
[Judy clicks on the items and they appear on the screen. Judy inspects these items as she inspected the dresses. She decides to purchase both accessories. FRED then asks Judy about delivery. Judy selects two day delivery at a cost of $5.00]
FRED: Just a reminder. You have not purchased hosiery in days. Do you wish to reorder at this time?
Judy: Yes
FRED: Same shades?

20. Why Do People Patronize a Retailer?
Merchandise Assortments
Service
Convenience
Information to make good selections
Price - Total cost to customer
Go to store, find right merchandise, return merchandise
Entertainment
Social interaction

21. Benefits of Electronic Channel
Increased Assortment
More Information to Evaluate Merchandise
Drill Down as Much as You Want
Full motion Video
Personalization
Fred, the Super Sales Associate
Try It On Virtually
Information for Solving Problems, Not Just Merchandise Characteristics
Virtual Communities

22. Using an Agent to Locate Merchandise

23. Virtual Communities
John Hagel III and Arthur G. Armstrong, Net Gain: Expanding Markets Through Virtual Communities. Boston: Harvard Business School Press, 1998
Definition: Virtual community is a network of members sharing common interests that interact with each other electronically.

24. Virtual Communities
Virtual community is a network of members sharing common interests that interact with each other electronically.
Examples:
IVillage - Women
Garden.Com - Gardeners
Ibelieve.com

25. The Knot -- Solving Your Wedding Problems

26. Value Proposition to Members
Full range of resources available to solve problem or satisfy from one source.
Integrate content and communication maximizing value of the available resources
Generation and dissemination of member generated information -- increases quality, breadth and depth of information.

27. Value Proposition for Members
Fantasy and Entertainment
Meaningful personal relationships -- Opportunity to interaction with other people with common interests draws people to community.
Access to competing vendors and publishers

28. Value Proposition for Commercial Organizer
Reduce cost of locating and targeting customers
Reduce cost of motivating customers to make purchase decisions
Opportunity for tailoring products, services,
Lower capital investment – don’t have to build store fronts.
Broader geographic reach

29. Benefits for Community Manager
Strengthen Brand Name, Reputation
Build Customer Relationships
Extend Database of Potential Customers
Revenue Generation
Sell Merchandise
Sell Services to Members
Membership fees (Annual Charge for Access)
Usage fee (Downloads, Time of Access)
Advertising (Charge Advertisers)

30. Sources of Revenue Subscription fees – fixed monthly charge
Usage fee – charge based on usage
Membership fees
Content delivery fees – charge to download information
Service fee – notification fee
Advertising
Transaction commissions
Sales of membership list or access to members

31. Who Is Best Suited to Organize a Virtual Community?
Concerned Consumers
Content Providers - Vertical Publications
Suppliers
Retailers
Offering Competing Products
Unbiased, Good Reputation
Know How to Run a Business Selling to Consumers -- Primary Revenue Source

32. What Merchandise Will Be Sold Successfully Over the Internet
“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

33. Why Did So Many e-tailers Fail?

34. 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

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

36. Summary
Present Electronic Retailing Does Not Reflect the Future Potential -- Electronic Retailing Will Attract a Significant Segment --Much More than Catalogs
Penetration of Electronic Retailing Will Be A Function of the Degree To Which Retailers Take Advantage of the Unique Properties of the Internet -Personalization and Interactivity
Search Agents Are Critical to Provide Consumer Benefits
Store-Based Retailers Are Well Positioned to Exploit This Opportunity But Might Not

37. Reasons for Becoming a Multi-Channel Retailer
-Increase Share of Wallet
-Overcome Limitations of Existing Format
-Expand Market
-Leverage Existing Assets
-Brand Name, Inventory, Customer Database
-Develop Insights in Customer Shopping Behavior

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

39. Shopping in the Future

40. Customers Want to Recognized No Matter What Channel they Use
Internet
Call Center
Customer
Relationship
Customers
Brick & Mortar
Pervasive
Kiosk

41. Integration – Key to Multi-Channel Retailing
Create a Seamless
Experience
Make it Easy
Provide Support
Know thy
Customer •
Ordering
Returns
Refunds
Call Center
Shopping
Advice
Service
Needs and
preferences
One to One
Marketing
Synchronized &
consistent service
regardless
of channel

42. Illustration of Multi-Channel Integration
Consumer does not find desired item in the store.
Consumer goes to kiosk to search for product
Kiosk links to chain’s web-site allowing consumers to find and purchase item
Consumer places order online for home delivery or store pick-up at a later time
Source: Progressive Grocer, 01 Feb 00; Grocery Headquarters, 01 Feb 00.