Chapter 3 Multichannel Retailing McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
The Multi-Channel Retailer <ul><li>A retailer that sells merchandise or service through more than one channel.  By using a...
3- More Reasons for Becoming  a Multi-Channel Retailer <ul><li>- Increase Share of Wallet </li></ul><ul><li>Example : Eddi...
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 <ul><li>Browsing </li></ul><ul><li>Touching and feeling </li></ul><ul><li>Perso...
Benefits Provided by  Catalog Channel <ul><li>Convenience </li></ul><ul><li>Information </li></ul><ul><li>Safety </li></ul...
<ul><li>$2.5 Trillion US Retail Sales </li></ul><ul><li>$200 Billion Catalog and Direct Sales </li></ul><ul><li>$4 Billion...
<ul><li>Source: Forrester, State of Consumers and Technology, 2006 </li></ul>3- What ’s the Big Deal About  Shopping on th...
Virtual Communities 3- People who seek information, products and services communicate with each other regarding specific i...
Virtual Communities <ul><li>Virtual community is a network of members sharing common interests that interact with each oth...
What People Buy Over the Internet <ul><li>Travel </li></ul><ul><li>PC/Electronics/Toys </li></ul><ul><li>Books/Software </...
<ul><li>“ Look and See ”  attributes vs.  “ Touch and Feel ”  attributes (?) </li></ul><ul><li>Degree to which information...
<ul><li>Branding : </li></ul><ul><li>National brands provide a consistent experience for customers to overcome not being a...
How Can the Electronic Channel Overcome Limitations? <ul><li>Use technology  to convert  “ touch and feel ”  information i...
My Virtual Model: Try It On <ul><li>Link to My Virtual Model H & M </li></ul>3-
How Can the Electronic Channel  Overcome Limitations? <ul><li>GIFTS </li></ul><ul><li>Saves time </li></ul><ul><li>Saves e...
How Can the Electronic Channel  Overcome Limitations? <ul><li>Use the Internet to Improve Multichannel shopping experience...
Evolution Toward  Multichannel Retailing <ul><li>Traditional store-based and catalog retailers are placing more emphasis o...
Recreation Equipment Inc. (REI) –  A Leader in Multichannel Retailing 3-
Capabilities for Multi-Channel Retailing <ul><li>To effectively operate and realize the benefits of multi-channel retailin...
Capabilities for  Multi-Channel Retailing 3-
Catalog Retailers can  Add Electronic Channel Easily <ul><li>Ready to take orders </li></ul><ul><li>Able to pack merchandi...
Why are store-based retailers evolving  into multi-channel retailers? <ul><li>Sales through an electronic channel are grow...
Impact of Internet Shopping  on Store Sales 3-
Ecommerce Myths <ul><li>Low Cost of Entry </li></ul><ul><li>Overestimate Importance of Technology, Under Estimated Need fo...
Which Channel Is the  Most Profitable? Cost Drivers in Stores and Electronic Retailers <ul><li>Bricks and Mortar, Salespeo...
Will Manufacturers Bypass Retailers  and Sell Directly to Consumers? <ul><li>Advantages of Retailers vs. Manufacturers </l...
Issues in Multi-Channel Retailing <ul><li>Integrated Shopping Experience </li></ul><ul><ul><li>Communicate with customers ...
3- Customer Web & Email •  24x7 •  Visual Call Center •  Convenient •  Immediate Kiosks •  Visual •  Convenient Handheld D...
Channels Offer  Complementary Benefits 3- Stores Internet Catalog <ul><li>Known Entity </li></ul><ul><li>Entertaining/  So...
Multichannel Shopping 3-
Illustration of  Multi-Channel Integration 3- Source:  Progressive Grocer , 01 Feb 00;  Grocery Headquarters , 01 Feb 00. ...
Opportunities to  Enhance Multi-Channel Experience <ul><li>Order on Internet, Pick-Up in Store </li></ul><ul><li>Promote W...
Integration – Key to  Multi-Channel Retailing 3-
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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

    1. 1. Chapter 3 Multichannel Retailing McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
    2. 2. The Multi-Channel Retailer <ul><li>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. </li></ul>3- Retailer Digital Vision / Getty Images Steve Cole/Getty Images The McGraw-Hill Companies, Inc./Andrew Resek, photographer
    3. 3. 3- More Reasons for Becoming a Multi-Channel Retailer <ul><li>- Increase Share of Wallet </li></ul><ul><li>Example : Eddie Bauer, single-channel customers spend $100-$200 </li></ul><ul><li>per year, dual-channel customers spend $300-$500 per year, </li></ul><ul><li>tri-channel customers spend $800-$1000 per year </li></ul><ul><li>- Overcome Limitations of Existing Format </li></ul><ul><li>- Expand Market </li></ul><ul><li>- Provide services more cost-efficiently </li></ul><ul><li>- Leverage Existing Assets </li></ul><ul><ul><li>- Brand Name, Inventory, Customer Database </li></ul></ul><ul><ul><li>- Develop Insights in Customer Shopping Behavior </li></ul></ul>
    4. 4. Dollars spent at different channels: Average annual dollars spent by J.C. Penny ’ s customers 3-
    5. 5. Benefits Provided by Different Channels 3-
    6. 6. Unique Benefits Provided by Store Channel <ul><li>Browsing </li></ul><ul><li>Touching and feeling </li></ul><ul><li>Personal service </li></ul><ul><li>Cash and credit payment </li></ul><ul><li>Entertainment and social interaction </li></ul><ul><li>Immediate gratification </li></ul><ul><li>Risk Reduction </li></ul>3- Royalty-Free/CORBIS (c) Brand X Pictures/PunchStock
    7. 7. Benefits Provided by Catalog Channel <ul><li>Convenience </li></ul><ul><li>Information </li></ul><ul><li>Safety </li></ul>3- Hoby Finn/Getty Images
    8. 8. <ul><li>$2.5 Trillion US Retail Sales </li></ul><ul><li>$200 Billion Catalog and Direct Sales </li></ul><ul><li>$4 Billion TV Home Shopping </li></ul><ul><li>$100 to 150 Billion Internet Retail Sales </li></ul><ul><li>Just a drop in the bucket, but growing fast! </li></ul>3- What ’s the Big Deal About Shopping on the Internet ?
    9. 9. <ul><li>Source: Forrester, State of Consumers and Technology, 2006 </li></ul>3- What ’s the Big Deal About Shopping on the Internet ?
    10. 10. 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
    11. 11. Virtual Communities <ul><li>Virtual community is a network of members sharing common interests that interact with each other electronically. </li></ul><ul><li>Examples: </li></ul><ul><ul><li>IVillage – Women </li></ul></ul><ul><ul><li>Pricegrabbers.com ; Epinion.com –product comparisons and reviews </li></ul></ul><ul><ul><li>Flypaper.com – talks about fashion </li></ul></ul><ul><ul><li>ThisNext.com , Kaboodle.com , Wists.com , StyleHive.com – social shopping that combines shopping and social networking </li></ul></ul>3-
    12. 12. What People Buy Over the Internet <ul><li>Travel </li></ul><ul><li>PC/Electronics/Toys </li></ul><ul><li>Books/Software </li></ul><ul><li>Apparel </li></ul><ul><li>Home & Garden </li></ul><ul><li>Jewelry & Watches </li></ul>3-
    13. 13. <ul><li>“ Look and See ” attributes vs. “ Touch and Feel ” attributes (?) </li></ul><ul><li>Degree to which information can be used to predict satisfaction prior to purchase </li></ul><ul><ul><li>Gifts </li></ul></ul><ul><ul><li>Services </li></ul></ul><ul><li>Might not need to “ Touch and Feel ” </li></ul><ul><ul><li>“ Touch and Feel ” not useful - Gifts </li></ul></ul><ul><ul><li>Superior presentation of “ Touch and Feel ” </li></ul></ul><ul><ul><li>Branding </li></ul></ul>3- What Merchandise Will Be Sold Successfully Through Electronic Channel?
    14. 14. <ul><li>Branding : </li></ul><ul><li>National brands provide a consistent experience for customers to overcome not being able to touch and feel. </li></ul>3- The McGraw-Hill Companies, Inc./Jill Braaten, photographer How Can the Electronic Channel Overcome Limitations?
    15. 15. How Can the Electronic Channel Overcome Limitations? <ul><li>Use technology to convert “ touch and feel ” information into “ look and see ” information </li></ul><ul><li>3-D Imaging </li></ul><ul><li>Zoom Technology </li></ul><ul><li>Live Chat </li></ul><ul><li>360 Degree Viewing </li></ul><ul><li>Virtual Models </li></ul><ul><li>conversion rates : % of consumers who buy the product after viewing it </li></ul>3- Technology increases conversion rates
    16. 16. My Virtual Model: Try It On <ul><li>Link to My Virtual Model H & M </li></ul>3-
    17. 17. How Can the Electronic Channel Overcome Limitations? <ul><li>GIFTS </li></ul><ul><li>Saves time </li></ul><ul><li>Saves effort in packing </li></ul><ul><li>Saves effort in delivery </li></ul><ul><li>SERVICES </li></ul><ul><li>No Shipping Problems </li></ul><ul><li>Examples </li></ul><ul><ul><li>Travel websites </li></ul></ul><ul><ul><li>Banking </li></ul></ul><ul><ul><li>Newspapers </li></ul></ul>3- Janis Christie/Getty Images The Electronic Channel Provides Superior Benefits for
    18. 18. How Can the Electronic Channel Overcome Limitations? <ul><li>Use the Internet to Improve Multichannel shopping experience </li></ul><ul><ul><li>Instantaneous and easy data collection on how and why customers shop, and how they ’ re dissatisfied or satisfied with their electronic shopping </li></ul></ul><ul><ul><li>Store and website layout design tailored to customers ’ buying habits </li></ul></ul>3-
    19. 19. Evolution Toward Multichannel Retailing <ul><li>Traditional store-based and catalog retailers are placing more emphasis on their electronic channels and evolving into multichannel retailers. </li></ul><ul><ul><li>E-channel gives a way to overcome limitations of existing format </li></ul></ul><ul><ul><li>With electronic channel, retailers can reach out to new markets </li></ul></ul><ul><ul><li>Builds share of wallet </li></ul></ul><ul><ul><li>E-channel enables retailers to give insights into customers ’ shopping behaviors </li></ul></ul>3-
    20. 20. Recreation Equipment Inc. (REI) – A Leader in Multichannel Retailing 3-
    21. 21. Capabilities for Multi-Channel Retailing <ul><li>To effectively operate and realize the benefits of multi-channel retailing, firms need to have skills in: </li></ul><ul><li>Developing assortments and managing inventory </li></ul><ul><li>Managing employees in distant locations </li></ul><ul><li>Distribute merchandise efficiently from DCs to stores </li></ul><ul><li>Present merchandise in catalogs </li></ul><ul><li>Present merchandise on websites </li></ul><ul><li>Process orders electronically </li></ul><ul><li>Efficient distribution of individual orders to homes </li></ul><ul><li>Operate information systems for all channels </li></ul>3-
    22. 22. Capabilities for Multi-Channel Retailing 3-
    23. 23. Catalog Retailers can Add Electronic Channel Easily <ul><li>Ready to take orders </li></ul><ul><li>Able to pack merchandise </li></ul><ul><li>Able to deliver </li></ul><ul><li>Able to handle returned merchandise </li></ul><ul><li>Already have a database </li></ul><ul><li>Visual merchandise for catalog is the same for electronic </li></ul>3- Steve Cole/Getty Images
    24. 24. Why are store-based retailers evolving into multi-channel retailers? <ul><li>Sales through an electronic channel are growing at over 20% per year </li></ul><ul><li>Adding an electronic channel creates immediate possession utility </li></ul><ul><li>Multi-channel retailers can attract more customers and satisfy existing customers better </li></ul><ul><li>The growth of sales in stores is declining </li></ul>3-
    25. 25. Impact of Internet Shopping on Store Sales 3-
    26. 26. Ecommerce Myths <ul><li>Low Cost of Entry </li></ul><ul><li>Overestimate Importance of Technology, Under Estimated Need for Traditional Resources </li></ul><ul><li>First Mover Wins </li></ul><ul><li>Gets Rid of the Middleman </li></ul>3-
    27. 27. Which Channel Is the Most Profitable? Cost Drivers in Stores and Electronic Retailers <ul><li>Bricks and Mortar, Salespeople </li></ul><ul><li>Attracting Customers to Store </li></ul><ul><li>Distribution Centers </li></ul><ul><li>Restocking Returned Merchandise </li></ul><ul><li>Building,Refreshing Web Site </li></ul><ul><li>Attracting Customers to Web Site: “ Customer-Acquisition Costs ” are huge but “ Customers ’ switching costs ” are tiny. </li></ul><ul><li>Picking, Packing, Mailing Small Orders to Home </li></ul><ul><li>Restocking Returned Merchandise </li></ul>3- Stores Electronic Retailers Few e-tailers are profitable
    28. 28. Will Manufacturers Bypass Retailers and Sell Directly to Consumers? <ul><li>Advantages of Retailers vs. Manufacturers </li></ul><ul><li>Distribute Merchandise Directly to Customers </li></ul><ul><li>Provide Assortments </li></ul><ul><li>Collect and Use Information about Customers </li></ul>3- Widespread Disintermediation Unlikely
    29. 29. Issues in Multi-Channel Retailing <ul><li>Integrated Shopping Experience </li></ul><ul><ul><li>Communicate with customers anytime, anywhere through multiple channels </li></ul></ul><ul><ul><li>Website, Store, Kiosks, Handheld Devices </li></ul></ul><ul><ul><li>Integrating legacy systems for seamless customer interface </li></ul></ul><ul><li>Brand Image </li></ul><ul><ul><li>Consistent brand image across different channels </li></ul></ul><ul><li>Merchandise assortment offered in each channel </li></ul><ul><li>Pricing across channels </li></ul>3-
    30. 30. 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
    31. 31. Channels Offer Complementary Benefits 3- Stores Internet Catalog <ul><li>Known Entity </li></ul><ul><li>Entertaining/ Social Experience </li></ul><ul><li>Easy Checkout and Returns </li></ul><ul><li>Personal Assistance </li></ul><ul><li>Product Trial- Complementary Merchandise </li></ul><ul><li>Immediate Gratification </li></ul><ul><li>Location Convenience </li></ul><ul><li>Speed </li></ul><ul><li>Greater Selection </li></ul><ul><li>Personalized Presentation </li></ul><ul><li>Community </li></ul><ul><li>Portability </li></ul><ul><li>High Quality Visual Presentation </li></ul>
    32. 32. Multichannel Shopping 3-
    33. 33. Illustration of Multi-Channel Integration 3- Source: Progressive Grocer , 01 Feb 00; Grocery Headquarters , 01 Feb 00. <ul><li>Consumer does not find desired item in the store. </li></ul><ul><li>Consumer goes to kiosk to search for product </li></ul><ul><li>Kiosk links to chain ’s web-site allowing consumers to find and purchase item </li></ul><ul><li>Consumer places order online for home delivery or store pick-up at a later time </li></ul>
    34. 34. Opportunities to Enhance Multi-Channel Experience <ul><li>Order on Internet, Pick-Up in Store </li></ul><ul><li>Promote Web Site on Receipts, Shopping Bags </li></ul><ul><li>Product Availability in Stores Available on Website </li></ul><ul><li>Kiosk in Stores to Order Merchandise Not Available in Stores </li></ul><ul><li>Plan Purchases (Shopping List) on Website </li></ul><ul><li>In-Store Events Promoted on Website </li></ul><ul><li>Ad Curricular on Website </li></ul>3-
    35. 35. Integration – Key to Multi-Channel Retailing 3-
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