5th Edition

PPT 3-1

Chapter 3
Multi-Channel
Retailing

McGraw-Hill/Irwin
Levy/Weitz:
Retailing Management, 5/e
PPT
3-2

Copyright 2004 by The McGraw-Hill Companies, Inc. All rights

The World of Retailing

PPT 3-3

Introduction
to Retailing

Types of Retailers

Multi-Channel
Retailing

Customer Buying
Behavior

The Multi-Channel Retailer

Retailer

PPT 3-4

Todays empowered consumers live in a multi-channel world -- Research

products online, buy offline, and demand service everywhere
Web & Email
Consumers buy
what they want,
when they want,
wherever they want

24x7
Visual

Call Center
Convenient
Immediate

Brick & Mortar

Touch/Feel
Experience driven

Kiosks

Customer

Visual
Convenient

Pervasive
Immediate
24x7

PPT 3-5

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 3-6

Unique Benefits Provided by Store Channel

Browsing
Touch and feel products
Personal service
Cash payment
Immediate gratification
Entertainment and social
interaction
PPT 3-7

Benefits Provided by Catalog Channel

Convenience
Portability, easily accessible
Visual presentation
Safety

PPT 3-8

Unique Benefits Provided by Internet

Channel
Convenience
Safety
Broad selection
Detailed information
Personalization
Problem-solving
information
PPT 3-9

Will Consumers Shop

Electronically from Home
or
Go to the Mall?
PPT 3-10

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 3-11

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
100
90
80
70
60
50
40
30
20
10
0

Findout about new

products
Search for product
information
Compare and Evaluate
Products
Purchase and Pay

In-Store
Internet Mail-Order Television
Visit
from Home Catalog
PPT 3-12

Kiosk

Pervasive

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 3-13

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 3-14

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 3-15

Internet Users Across the Globe

PPT 3-16

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:
PPT 3-17

Formal cocktail party

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:

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 3-18

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:
PPT 3-19

Yes

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 3-20

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 3-21

Using an Agent to
Locate Merchandise

PPT 3-22

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 3-23

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 3-24

The Knot -- Solving

Your Wedding Problems

PPT 3-25

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 3-26

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 3-27

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 3-28

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 3-29

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 3-30

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 3-31

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
PPT 3-32

Branding

Why Did So Many e-tailers Fail?

PPT 3-33

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 3-34

Advantages of Retailers
vs. Manufacturers

Distribute Merchandise Directly to Customers

Provide Assortments
Collect and Use Information about Customers

Widespread Disintermediation Unlikely

PPT 3-35

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 3-36

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 3-37

Issues Confronting a Multi-Channel Retailer

Maintaining Brand Image Across

Channels
Merchandise Assortment Offered in Each
Channel
Pricing Across Channels

PPT 3-38

Shopping in the Future

PPT 3-39

Customers Want to Recognized No Matter

What Channel they Use
Internet

Call Center

Customers

Brick & Mortar

Pervasive

Kiosk
PPT 3-40

Customer
Relationship

Integration Key to Multi-Channel Retailing

Create a Seamless
Experience
Synchronized &
consistent service
regardless
of channel

Ordering
Returns
Refunds

Make it Easy
PPT 3-41

Know thy
Customer
Needs and
preferences
One to One
Marketing

Call Center
Shopping
Advice
Customer
Service

Provide Support

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
chains web-site
allowing consumers
to find and
purchase item

Source: Progressive Grocer, 01 Feb 00; Grocery Headquarters, 01 Feb 00.

PPT 3-42

Consumer places
order online for
home delivery or
store pick-up at a
later time