Nonstore Retailing & Electronic Channels

1
Nonstore Retailing Electronic Channels

• Chapter 14 with Duane Weaver

2
Outline

• Nonstore retailing
• Catalog
• Direct-Selling Orgs (DSOs)
• Electronic Channels
• Market Opps
• Service Output Provision and Demand-Side Gaps
• Channel Flow Performance and Supply-Side Gaps
• Coordination Challenges

3
Non-Store Retailing Catalogs

• E.g. Sears Catalog, Lands End
• Service Outputs Offered
• Break bulk
• Assortment and variety can vary widely (trend
  towards specialty in-depth focused narrower range
  products)
• Smaller Catalogs more targeted mailings
• Ultimate in Spatial Convenience (shop from home,
  yet perhaps a delay without expense of overnight
  delivery)

4
Non-Store Retailing Catalogs

• Segments served
• Time starved working mother
• Busy Single parents
• People whose time and travel costs to get to a
  store are expensive
• The Housebound
• Others?
• Related Costs and Risks
• Reliance on manufacturers if do not produce
  yourself
• Creation of the catalog (size, product coverage,
  segment distribution)
• Mailing List look at lifetime value of mailing
  list and delete or add customers
• Order Fulfillment Logistics of picking and
  packing
• Stock-Outs inventory management vs. delivery
  delays
• Merchandise returns 6-15 in stores, 35 in
  catalog sales. Returns are more expensive to
  manage (bulk broken) and ship

5
Direct-Selling Orgs (DSOs)

• Direct Selling is the sale of a consumer product
  or service in a face to face manner away from a
  fixed retail location.
• Typically high reliance on personal selling
• E.G.s Amway, Mary Kay, Herbal Life, Avon, and
  Tupperware.
• Top 5 DSO countries - sales (Canada is 10th)
• Japan
• USA
• Brazil
• Germany
• Korea

6
Direct-Selling Orgs (DSOs)MLM- Multi-level
Marketing (MLDSO)

• MLDSO distributors are compensated in three
  different ways
• Mark-up on wholesale cost earnings
• MLDSO commission paid per sale
• MLDSO commission on sales made by subordinates
  (recruits)
• Balance growth of Network vs. Sale of products
  (often based on personal consumption)
• Ilegal Pyramid Schemes
• Fraudulent mechanisms by which new recruits are
  required to pay a nonrefundable fee for becoming
  a distributor and the distributors only reward
  is this fee (there is no sale and/or consumption
  of a product or service). Ultimately the last
  layer of the pyramid will make no money from
  anyone (population maximized), yet the highest in
  the pyramid earns money from everyone.

7
Electronic Channels

• any channel that involves using the Internet as
  a means of reaching the end-user or any channel
  for which the consumer literally buys on-line.
  B2C or B2B.

8
Market Potential for E-Channels

• Restrictive Market must be able to shop
  online.
• Strong Growth in some countries 1998 33 of US
  online, whereas in 2003 56 of US online

9
Service Outputs and Demand-Side Gaps in E-Channels

• Positives
• Any time of day or night spatial convenience
• More pleasant shopping experience, takes less
  time
• Price-value promotions for online shopping
• Lower prices
• Broader access
• Consumer Control

10
Service Outputs and Demand-Side Gaps in E-Channels

• Negatives
• Product return challenges
• Stock availability
• Timely delivery (like catalog sales)
• Trust and Privacy
• Prefer face-to-face shopping

11
E-Channel Flow Performance and Supply-Side Gaps

• New Fixed Costs Created
• Technical Infrastructure
• Warehousing or inventory arrangements
• Need for new intermediaries (E-bay, yahoo)
• May reduce costs (EDI integration, VMI, and CRP
  systems)
• Physical Possession inventory, pick, pack, ship
  costs increase. 3rd Party expert business is on
  the rise as a result (FedEx).
• Promotion impacts on alternative channels such
  as retail stores
• Negotiation may decrease or increase in
  intensity
• Risking increased fear about disclosure of
  financial information online, reduce risk of
  holding inventory (ship direct from manufacturer)
• Ordering Technology has improved effectiveness
  of ordering dramatically (reducing operating cost
  and increasing entry cost)
• Payment existence of electronic payment from
  backing has facilitated e-commerce growth. Trust
  issues have induced new 3rd party members like
  PayPal.

12
E-Channel Coordination Challenges

• Creates Dual Channel Conflicts related to Goals,
  Domain and perception-of-reality.
• Bricks and Mortar in combination with online
  resellers may exert greater strength in the
  channel, increasing power conflicts.
• Confusion about online threat results in
  restrictive channel behaviour precluding channel
  success (e.g. mall merchants restricted from
  online expansion by mall leasor)

13
Thank You!