Lecture Retailing management (6/e): Chapter 3 - Levy Weitz

Chapter 3
Multi-Channel Retailing

McGraw­Hill/Irwin
Retailing Management, 6/e

Copyright © 2007 by The McGraw­Hill Companies, Inc. All rights reserved.


The World of Retailing

Introduction to Retailing

Types of Retailers

Multi-Channel Retailing

Customer Buying
Behavior

3-2


The Multi-Channel Retailer

Steve Cole/Getty Images

Retailer

Digital Vision / Getty Images

The McGraw-Hill Companies,
Inc./Andrew Resek, photographer

3-3


3-4

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


3-5

Benefits Provided by Different Channels


3-6

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


3-7

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

Hoby Finn/Getty Images


3-8

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


Problem Solution Benefits
Offered By Electronic Channel
• Bundling Information, Services, and
Products
• Examples
– iVillage
– The Wedding Channel, The Knot

3-9


Virtual Communities
People who seek information, products and
services communicate with each other regarding
specific issues

Royalty-Free/CORBIS

310

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

311


Personalization Potential
Of Electronic Channel

312


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

313


314

Does The Electronic Channel Have
Lower Costs Than Stores?
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


315

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


316

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


3What Merchandise Will Be Sold
17
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


Types of Attributes

318

 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)

How to Sell Over the Internet

319

…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


How Can The Electronic Channel
Overcome Limitations?

320

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


321

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


322

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


Resources Needed to Compete
Effectively in Internet Retailing

323

• Exciting, Easy to Use Web Site
• Management Information Systems
– Order processing and status
– Customer database
– Personalization software
But These Resources Were Not Enough!


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

324


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

325