Part Three: Chapter 13 Internet Retailing

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Internet Marketing & e-CommerceWard HansonKirthi Kalyanam

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Part Three: Chapter 13Internet Retailing

“A salesman is got to dream, boy. It comes with the territory.”

Arthur Miller, Death of a Salesman


Growth of Online Retail

• Quarterly measurement of e-commerce added to U.S. retail activity in 1999

• Grew from $5 billion in Q4 1999 to $23 billion in Q4 2005

• Annual online retail exceeded $84 billion in 2005

• Still, just 2.4 percent of all retail sales



DATA SOURCE: www.census.gov



• Online retail percentages vary greatly across product categories

• Key areas for retail sales:– Computer hardware and software– Tickets– Books

• Top categories involve digital products or information-rich purchases



Consumer e-commerce penetration by product categorySOURCE: The State of Retail Online, 6.0, a Shop.org Survey conducted by Forrester Research



• For Internet retailers, better performance has meant better results– Benefits of higher inventory productivity– Swift response to changes in customer

demands and product transformations – Customer satisfaction generally higher



American customer satisfaction index scores

Data Source: American Customer Satisfaction Index, www.theacsi.org


iPACE and Online Shopping

• Understanding basic consumer needs to find right approach for right channel: – Information– Price– Assortment– Convenience– Entertainment



• Information: Quality and features of a product, from initial consideration set through final purchase, shipping and returns



• Price: Draw of lower prices and ease of comparison, but consumers also engage in price partitioning – evaluating influence of taxes and shipping costs on bottom line



• Assortment: Greater variety and availability online, products are easier to configure and prices easier to adjust



• Convenience: Avoiding the hassle of traditional stores, easing repeat purchases



• Entertainment: The online thrills of eBay vs. the lost social aspect of shopping excursions with friends


Online Shopping Process

The consumer shopping cycle



The consumer shopping cycle on a web site



• Step One: Finding the right product– Influence of search and browsing to find

right product in rapidly expanding Web marketplace

– Helping shoppers narrow selection



• Step Two: Acquiring information – Overcoming the physical limitations of

online shopping– Product descriptions through images,

zoom, ratings and reviews – Personalized information through virtual

models and diagrams– Cross selling and solution selling

opportunities



Virtual model™ on Lands’ End.com



• Step Three: Evaluating alternatives– Two versions of the choice model

• Compensatory choice model compares products and services on all attributes

• Non-compensatory choice model compares products based on certain attributes, eliminates products without those key features

– Shopping tools – such as a comparison matrix or assistant – reduce consumer effort; tools that screen products have strongest impact on consumer accuracy



• Step Four: Placing the order– Many Internet shoppers fail to complete

attempted purchases• Poor information design, lack of transparency

on ship costs

– Efficient reordering and repeat purchase systems help track customers and hold marketing campaigns accountable



• Step Five: Following up– Post-purchase notifications such as order

confirmation, total price, shipping date and expected delivery date

– Returns made simpler with prepaid return labels, merchandise pickup


Multi-Channel Retailing

• Understanding the hybrid customer (the shopping “centaur”) who is willing to shop online but buy at a traditional store, and visa versa – Customers who shop regularly in

traditional stores are least likely to use multiple channels

– Online and catalog shoppers more likely to use other channels for some purchases



Shopper

Classification

Percent Purchasing in Channel

Online Store Catalog

Online 100% 78% 45%

Store 6% 100% 22%

Catalog 23% 36% 100%

Customers from one channel who purchased in another

SOURCE: The State of Retail Online, 5.0, Shop.org



Shopper

Classification

% Reporting a Purchase Influenced By

Online Store Catalog

Online 100% 25% 68%

Store 22% 100% 26%

Catalog 39% 26% 100%

Buyers who purchased something in one channel previously seen in another channel

SOURCE: Company reports as compiled by Forward Retailing, Inc.



Shopper groups indicating preference for research and buying

SOURCE: The State of Retail Online, 5.0, Shop.org



• Challenges for retailers working across online and traditional channels– Determining what products are sold in the

store, online or through catalogs– Communications and logistics– Pricing discrepancies – Planning consistent promotional offerings– Rewarding the right seller: Does the credit

go online or off?

Documents

Part Three: Chapter 13 Internet Retailing