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Multichannel Retailing. - Final Ppt
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New form of Retailing
• Browsing
• Touching and feeling
• Personal service
• Cash and credit payment
• Entertainment and social interaction
• Immediate gratification
• Risk Reduction
Unique Benefits Provided by Store Channel
Royalty-Free/CORBIS
(c) Brand X Pictures/PunchStock
Benefits Provided by Catalog Channel
• Convenience
• Information
• Safety
Hoby Finn/Getty Images
Average share of major channels of retail selling
• $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!
Selling on internet
• It is just about 6 % of the total sales .
• Just a drop in the bucket, but growing fast!
• Internet sales is growing at the rate of about 20% every year.
• Furthermore , it has an important impact on other channels
75 % of US customers say , they get information or shop online prior to visiting a regular store .
49% purchase from different retailer online that researched online . 61% of US auto customers use the web to research their car
purchases .
Impediments of shopping online
• Technological concerns are becoming less important . Access to internet Broadband connections Privacy , security concerns .
Are the benefits of shopping online greater than benefits of going to a store ?
Internet Channel
• Broader Selection
• More and Better Information to Evaluate Merchandise
– Drill Down as Much as You Want– Full motion Video
• Personalization– Information is tailored to Individual consumers to help them make quicker
and better purchase decisions
– Customized Information -- Side By Side Comparisons, Full Motion Video
– Try It On Virtually
• Information for Solving Problems, Not Just Merchandise Characteristics– Virtual Communities
More and better information to evaluate merchandise
Side by side comparison
Personalized customer service
Using an agent to locate merchandise
Problem solution benefits offered by internet channels
• Bundling information services and products.
Virtual communities • 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 other participants in the shopping experience.
Virtual communities
Virtual community is a network of members sharing common interests that interact with each other electronically .
Example :
• Pricegrabbers.com; epinion.com- product comparisons and reviews.
• Flypaper.com – talks about fashion
• Thisnext.com – social shopping that combines shopping and social networking .
What people buy over internet
• Travel
• PC/Electronics /Toys
• Books/ Software
• Apparel
• Home and garden
• Jewelry and watches
What merchandise will be sold successfully through electronic channel
• “Look and see” attribute 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
How can the electronic channel overcome limitations ?
Branding National brands provide a consistent experience for
customers to overcome not being able to touch and feel .
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
Technology increasing conversion rate , i.e % of consumers who buy the product after viewing it .
• Electronic channels provide superior benefits for :• Gifts Saves time Saves efforts in packing Saves efforts in delivery
• Services • No shipping problems • Eg: Travel Websites Banking Newspapers
• Use the internet to improve multi channel 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 risk 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 .
Evolution towards multi channel retailing
• Traditional store based and catalog retailers are placing more emphasis on their electronic channels and evolving into multi channel retailers .
E-channels gives a way to overcome limitations of existing formats.
With electronic channel , retailers can reach out to new markets .
Build share of wallet E-channel enables retailers to give insights into
customers’ shopping behavors .
Multi Channel retailing
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.
Digital Vision / Getty Images
Steve Cole/Getty Images
The McGraw-Hill Companies, Inc./Andrew Resek, photographer
Retailer
Why are Retailers Using Multiple Channels to Interact with
Customers?
customer
Consumers buy what they want,When they want,Wherever they want
store kiosk catalog Call center Web/E-mail mobile
• Customers want to interact in different ways .
• Each channel offers a unique set of benefits for customers .
More reasons for becoming a multi channel retailer
• Increase share of wallet .
• Overcome limitations of existing format .
• Expand market .
• Provide services more efficiently .
• Leverage existing assets .
• Brand name , inventory , customer database .
• Develop insights in customer shopping behaviour.
Dollars spend at different channels. Average dollars spend by J.C. Penny’s customers
Benefits Provided by Different Channels
Recreation Equipment Inc ( REI ) – A leader in multi channel retailing
Overcoming existing formats
• Size of the store is the greatest constraint for the store
• By blending store with internet –enabled kiosks , retailers expand assortments offered to shoppers .
• Store based retailers face inconsistent execution .
• Kiosks can be used by both sales associates and customers for up to date product information , stock information and price reduction on clearances .
Percentage of cross channel shoppers
Capabilities required 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 DC’s to stores . Present merchandise in catalogs Present merchandise on websites Process orders electronically Efficient distribution of individual orders to homes Operate information systems to all channels .
Critical resources and Capabilities for multi channel retailing
Resources possessed by different firm types
Resources needed to compete effectively in internet retailing
• Exciting and easy to use website .
• Management information systems Order processing and status Customer data base Personalization software
But these resources are not enough !
• Retailing skills Managing inventory Editing assortment
• Efficient fulfillment systems Significant cost – last mile Picking and packing individual orders Handling returns – reverse distribution
• Strong brand name and image . Built traffic Reduce customer perceived risk
• Complementary merchandise One stop shopping Lower shipping costs
• Availability of customer information Tailored presentations – personalization
Why did internet retail entrepreneur fail ?
• Lack of skills to succeed in internet retailing
• Consumers prefer multi channel retailers ( bricks and clicks )
Why did electronic only retailers fail ?
• They had skills in web design
• They had skills in systems to manage transactions
• 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 at homes.
• They did not posses sufficient resources to evolve into multichannel retailers .
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.
Why are store based retailers evolving into multi channel retailers ?
• Sales through 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.
E-Commerce Myths
• Low cost of entry
• Overestimate importance of technology , under estimate 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
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 : “Customer-Acquisition Costs ” are huge but “Customers” switching costs are very tiny .
• Picking , packing , mailing small orders to Home .
• Restocking returned merchandise .
Will Electronic Channel’s low search cost increase price competition ?
• Conventional Wisdom Greater comparison shopping Offerings easily compared on price Lower search cost = 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.
Will manufacturers by pass retailers and sell directly to customers
Advantages of retailers vs manufacturers
• Distribute merchandise directly to customers
• Provide assortments
• Collect and use information about customers .
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 .
Channels offer complementary benefits
Multi channel shopping Features and Services Description
Return Policy Online purchases can be returned in the store
Promotions Web sites and stores feature offline and online sales , promotions and events
Information
Customers and sales associates can assess the website in the store ( sometimes through Kiosks ) to get product and availability information .
Section Websites and stores access larger merchandise selection online
Store pick up Online orders can be picked up at the local store
Inventory Web sites indicates where inventory is available in the store
Shipping Free shipping , especially for in-store pick up
Illustration of multi channel integration
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 in future
Shopping experience – personalization potential
Integration – key to multi channel retailing
Benefits of 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
Benefits of Multichannel Retailing
• Gaining Insights into Consumer Shopping Behavior• Expanding Market Presence• Building a Strategic Advantage
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
• Integrated Shopping Experience– Communicate with customers
anytime, anywhere through multiple channels
– Website, Store, Kiosks, Handheld Devices
– Integrating legacy systems for seamless customer interface
Challenges of Effective Multichannel Retailing
Today’s empowered consumers live in a multi-channel world
research products online, buy offline, and demand service everywhere
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
Keywords• Catalog retailing Nonstore retail format in which the retail
offering is communicated to a customer through a catalog.• Channel migration When consumers’ collect information
about products on one company’s channel and then buys the product from another competitor.
• Direct selling A retail format in which a salesperson, frequently an independent distributor, contacts a customer directly in a convenient location (either at a customer’s home or at work), demonstrates merchandise benefits, takes an order, and delivers the merchandise to the customer.
Keywords• Disintermediation When a manufacturer sells directly to
consumers, thus competing directly with its retailers.• Electronic retailing A retail format in which the retailers
communicate with customers and offer products and services for sale over the Internet.
• Internet channel, Internet retailing, E-channel• Multichannel retailer Retailer that sells merchandise or
services through more than one channel.