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  • 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.

Chap003 Chap003 Presentation Transcript

  • Chapter 3 Multichannel Retailing McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
  • The Multi-Channel Retailer
    • A retailer that sells merchandise or service through more than one channel. By using a combination of channels, retailers can exploit the unique benefits provided by each channel.
    3- Retailer Digital Vision / Getty Images Steve Cole/Getty Images The McGraw-Hill Companies, Inc./Andrew Resek, photographer
  • 3- More Reasons for Becoming a Multi-Channel Retailer
    • - Increase Share of Wallet
    • Example : Eddie Bauer, single-channel customers spend $100-$200
    • per year, dual-channel customers spend $300-$500 per year,
    • tri-channel customers spend $800-$1000 per year
    • - Overcome Limitations of Existing Format
    • - Expand Market
    • - Provide services more cost-efficiently
    • - Leverage Existing Assets
      • - Brand Name, Inventory, Customer Database
      • - Develop Insights in Customer Shopping Behavior
  • Dollars spent at different channels: Average annual dollars spent by J.C. Penny ’ s customers 3-
  • Benefits Provided by Different Channels 3-
  • Unique Benefits Provided by Store Channel
    • Browsing
    • Touching and feeling
    • Personal service
    • Cash and credit payment
    • Entertainment and social interaction
    • Immediate gratification
    • Risk Reduction
    3- Royalty-Free/CORBIS (c) Brand X Pictures/PunchStock
  • Benefits Provided by Catalog Channel
    • Convenience
    • Information
    • Safety
    3- Hoby Finn/Getty Images
    • $2.5 Trillion US Retail Sales
    • $200 Billion Catalog and Direct Sales
    • $4 Billion TV Home Shopping
    • $100 to 150 Billion Internet Retail Sales
    • Just a drop in the bucket, but growing fast!
    3- What ’s the Big Deal About Shopping on the Internet ?
    • Source: Forrester, State of Consumers and Technology, 2006
    3- What ’s the Big Deal About Shopping on the Internet ?
  • Virtual Communities 3- People who seek information, products and services communicate with each other regarding specific issues Social shoppers : seek not just information but also an enhanced emotional connection to others participants in the shopping experience Royalty-Free/CORBIS
  • Virtual Communities
    • Virtual community is a network of members sharing common interests that interact with each other electronically.
    • Examples:
      • IVillage – Women
      • ; –product comparisons and reviews
      • – talks about fashion
      • , , , – social shopping that combines shopping and social networking
  • What People Buy Over the Internet
    • Travel
    • PC/Electronics/Toys
    • Books/Software
    • Apparel
    • Home & Garden
    • Jewelry & Watches
    • “ 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
    3- What Merchandise Will Be Sold Successfully Through Electronic Channel?
    • Branding :
    • National brands provide a consistent experience for customers to overcome not being able to touch and feel.
    3- The McGraw-Hill Companies, Inc./Jill Braaten, photographer How Can the Electronic Channel Overcome Limitations?
  • 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
    • conversion rates : % of consumers who buy the product after viewing it
    3- Technology increases conversion rates
  • My Virtual Model: Try It On
    • Link to My Virtual Model H & M
  • How Can the Electronic Channel Overcome Limitations?
    • GIFTS
    • Saves time
    • Saves effort in packing
    • Saves effort in delivery
    • No Shipping Problems
    • Examples
      • Travel websites
      • Banking
      • Newspapers
    3- Janis Christie/Getty Images The Electronic Channel Provides Superior Benefits for
  • How Can the Electronic Channel Overcome Limitations?
    • Use the Internet to Improve Multichannel shopping experience
      • Instantaneous and easy data collection on how and why customers shop, and how they ’ re dissatisfied or satisfied with their electronic shopping
      • Store and website layout design tailored to customers ’ buying habits
  • Perceived Risks of Electronic Shopping
    • 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
    3- Don Farrall/Getty Images
  • Evolution Toward Multichannel Retailing
    • Traditional store-based and catalog retailers are placing more emphasis on their electronic channels and evolving into multichannel retailers.
      • E-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
  • 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
  • Capabilities for Multi-Channel Retailing 3-
  • Why Did Internet Retail Entrepreneurs Fail?
    • Lack of Skills to Succeed in Internet Retailing
    • Consumers Prefer Multi-Channel Retailers (Bricks and Clicks)
  • Why did Electronic-only Retailers Fail?
    • 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
    • They did not posses sufficient resources to evolve into multichannel retailers
    3- Digital Vision/Getty Images They had skills in web design They had skills in systems to manage transactions
  • 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
    3- Steve Cole/Getty Images
  • Why are store-based retailers evolving into multi-channel retailers?
    • Sales through an electronic channel are growing at over 20% per year
    • Adding an electronic channel creates immediate possession utility
    • Multi-channel retailers can attract more customers and satisfy existing customers better
    • The growth of sales in stores is declining
  • Impact of Internet Shopping on Store Sales 3-
  • Ecommerce Myths
    • Low Cost of Entry
    • Overestimate Importance of Technology, Under Estimated Need for Traditional Resources
    • First Mover Wins
    • Gets Rid of the Middleman
  • Which Channel Is the Most Profitable? Cost Drivers in Stores and Electronic Retailers
    • Bricks and Mortar, Salespeople
    • Attracting Customers to Store
    • Distribution Centers
    • Restocking Returned Merchandise
    • Building,Refreshing Web Site
    • Attracting Customers to Web Site: “ Customer-Acquisition Costs ” are huge but “ Customers ’ switching costs ” are tiny.
    • Picking, Packing, Mailing Small Orders to Home
    • Restocking Returned Merchandise
    3- Stores Electronic Retailers Few e-tailers are profitable
  • Will Manufacturers Bypass Retailers and Sell Directly to Consumers?
    • Advantages of Retailers vs. Manufacturers
    • Distribute Merchandise Directly to Customers
    • Provide Assortments
    • Collect and Use Information about Customers
    3- Widespread Disintermediation Unlikely
  • Issues in Multi-Channel Retailing
    • Integrated Shopping Experience
      • Communicate with customers anytime, anywhere through multiple channels
      • Website, Store, Kiosks, Handheld Devices
      • Integrating legacy systems for seamless customer interface
    • Brand Image
      • Consistent brand image across different channels
    • Merchandise assortment offered in each channel
    • Pricing across channels
  • 3- Customer Web & Email • 24x7 • Visual Call Center • Convenient • Immediate Kiosks • Visual • Convenient Handheld Devices • Immediate • 24x7 Brick & Mortar • Touch/Feel • Experience driven Consumers buy what they want, when they want, wherever they want
  • Channels Offer Complementary Benefits 3- Stores Internet Catalog
    • Known Entity
    • Entertaining/ Social Experience
    • Easy Checkout and Returns
    • Personal Assistance
    • Product Trial- Complementary Merchandise
    • Immediate Gratification
    • Location Convenience
    • Speed
    • Greater Selection
    • Personalized Presentation
    • Community
    • Portability
    • High Quality Visual Presentation
  • Multichannel Shopping 3-
  • Illustration of Multi-Channel Integration 3- 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 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
  • Opportunities to Enhance Multi-Channel Experience
    • Order on Internet, Pick-Up in Store
    • Promote Web Site on Receipts, Shopping Bags
    • Product Availability in Stores Available on Website
    • Kiosk in Stores to Order Merchandise Not Available in Stores
    • Plan Purchases (Shopping List) on Website
    • In-Store Events Promoted on Website
    • Ad Curricular on Website
  • Shopping Experience: Personalization Potential 3-
  • Integration – Key to Multi-Channel Retailing 3- Shopping Experience