PPT 3-1

5
th
Edition
PPT 3-2
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.
PPT 3-3
The World of Retailing
Introduction
to Retailing
Types of Retailers
Multi-Channel
Retailing
Customer Buying
Behavior
PPT 3-4
The Multi-Channel Retailer
Retailer
PPT 3-5
Customer
Todays empowered consumers live in a multi-channel world -- Research
products online, buy offline, and demand service everywhere
Web & Email
24x7
Visual
Call Center
Convenient
Immediate
Kiosks
Visual
Convenient
Pervasive
Immediate
24x7
Brick & Mortar
Touch/Feel
Experience driven
Consumers buy
what they want,
when they want,
wherever they want
PPT 3-6
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

PPT 3-7
Unique Benefits Provided by Store Channel
Browsing
Touch and feel products
Personal service
Cash payment
Immediate gratification
Entertainment and social
interaction

PPT 3-8
Benefits Provided by Catalog Channel
Convenience
Portability, easily accessible
Visual presentation
Safety
PPT 3-9
Unique Benefits Provided by Internet
Channel
Convenience
Safety
Broad selection
Detailed information
Personalization
Problem-solving
information

PPT 3-10
Will Consumers Shop
Electronically from Home
or
Go to the Mall?
PPT 3-11
Whats 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!
PPT 3-12
Electronic Channel Influences
Shopping Behavior
0
10
20
30
40
50
60
70
80
90
100
In-Store
Visit
Internet
from Home
Mail-Order
Catalog
Television Kiosk Pervasive
Findout about new
products
Search for product
information
Compare and Evaluate
Products
Purchase and Pay
Even though the electronic channel accounts for less than 2% of
retail sales, the Internet is used extensively in the buying
process
PPT 3-13
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
PPT 3-14
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?
PPT 3-15
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)
PPT 3-16
Internet Users Across the Globe
PPT 3-17
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
PPT 3-18
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.
PPT 3-19
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 30
days. Do you wish to reorder at this time?
Judy: Yes
FRED: Same shades?
Judy: Yes
PPT 3-20
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
PPT 3-21
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
PPT 3-22
Using an Agent to
Locate Merchandise
PPT 3-23
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.

PPT 3-24
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



PPT 3-25
The Knot -- Solving
Your Wedding Problems
PPT 3-26
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.

PPT 3-27
Value Proposition for Members
Meaningful personal
relationships --
Opportunity to
interaction with other
people with common
interests draws
people to community.
Fantasy and
Entertainment
Access to competing
vendors and publishers
PPT 3-28
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 dont have to
build store fronts.
Broader geographic reach
PPT 3-29
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)
PPT 3-30
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
PPT 3-31
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
PPT 3-32
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
PPT 3-33
Why Did So Many e-tailers Fail?
Pure E-
Tailer
Catalog
Retailers
Store-Based
Retailers
Vendors
Assortments Limited Limited Excellent Poor
Fulfillment Poor Excellent Good Poor
Customer
Information

Poor Excellent Good Poor
Unique
Merchandise

Poor Good Good Excellent
Brand Name Poor Some
Excellent
Some
Excellent
Some
Excellent


PPT 3-34
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
PPT 3-35
Advantages of Retailers
vs. Manufacturers
Distribute Merchandise Directly to Customers
Provide Assortments
Collect and Use Information about Customers
Widespread Disintermediation Unlikely
PPT 3-36
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
PPT 3-37
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
PPT 3-38
Issues Confronting a Multi-Channel Retailer
Maintaining Brand Image Across
Channels
Merchandise Assortment Offered in Each
Channel
Pricing Across Channels
PPT 3-39
Shopping in the Future
PPT 3-40
Customers Want to Recognized No Matter
What Channel they Use
Kiosk
Internet
Pervasive
Call Center
Customer
Relationship
Brick & Mortar
Customers
PPT 3-41
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
Customer
Service
Needs and
preferences
One to One
Marketing
Synchronized &
consistent service
regardless
of channel
PPT 3-42
Source: Progressive Grocer, 01 Feb 00; Grocery Headquarters, 01 Feb 00.
Consumer does not find
desired item in the store.
Consumer goes to
kiosk to search for
product
Kiosk links to
chains web-site
allowing consumers
to find and
purchase item
Consumer places
order online for
home delivery or
store pick-up at a
later time
Illustration of Multi-Channel Integration