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Multi-Channel Retailing

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Title: Multi-Channel Retailing


1
Chapter 3
  • Multi-Channel Retailing

2
The World of Retailing
Introduction to Retailing
Types of Retailers
Multi-Channel Retailing
Customer Buying Behavior
3
Questions
  • What are the unique customer benefits offered by
    the three retail channels stores, catalogs, and
    the Internet?
  • Why are retailers moving toward using all three
    channels?
  • How do multichannel retailers provide more value
    to their customers?
  • What are the key success factors in multichannel
    retailing?
  • How might technology affect the future shopping
    experience?

4
The Multi-Channel Retailer
Retailer
Steve Cole/Getty Images
The McGraw-Hill Companies, Inc./Andrew Resek,
photographer
Digital Vision / Getty Images
  • 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.

5
Why are Retailers Using Multiple Channels to
Interact with Customers?
  • Customer wants to interact in different ways
  • Each channel offers a unique set of benefits for
    Customers

6
Why are Retailers Using Multiple Channels to
Interact with Customers?
Consumers buy what they want, When they
want, Wherever they want
customer
store
kiosk
catalog
Call center
mobile
Web/E-mail
7
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
8
Dollars spent at different channels Average
annual dollars spent by JCPennys customers
9
Benefits Provided by Different Channels
10
Unique Benefits Provided by Store Channel
  • Browsing
  • Touching and feeling
  • Personal service
  • Cash and credit payment
  • Entertainment and social interaction
  • Immediate gratification
  • Risk Reduction

(c) Brand X Pictures/PunchStock
Royalty-Free/CORBIS
11
Benefits Provided by Catalog Channel
  • Convenience
  • Information
  • Safety

Hoby Finn/Getty Images
12
Whats the Big Deal About Shopping on the
Internet?
  • 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!

13
Whats the Big Deal About Shopping on the
Internet?
  • Just 6 of total retail sales,
  • but is growing very fast (about 25 annually)
  • Furthermore, it has an important impact on other
    channels
  • 75 of US consumers say they sometimes get
    information or shop online prior to visiting
    a regular store
  • 49 purchase from a different retailer offline
    than researched online
  • 61 of US auto consumers use the Web to research
    their car purchases.

14
Whats the Big Deal About Shopping on the
Internet?
  • Source Forrester, State of Consumers and
    Technology, 2006

15
Impediments to Shopping On-Line
  • Technological concerns are becoming less
    important
  • Access to Internet
  • Broadband Connections
  • Privacy, Security concerns

Are the benefits of shopping on-line greater than
the benefits of going to a store?
16
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
  • Fred is a Super Retail Salesperson
  • Customized Information -- Side By Side
    Comparisons, Full Motion Video
  • Try It On Virtually
  • Information for Solving Problems, Not Just
    Merchandise Characteristics
  • Virtual Communities

17
More and better information to evaluate
merchandise
18
Side-by-Side Comparison
19
Personalized Customer Service
20
Using an Agent to Locate Merchandise
21
Problem Solution Benefits Offered By Internet
Channel
  • Bundling Information, Services, and Products
  • Examples
  • iVillage
  • The Wedding Channel
  • Garden.com

22
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 others participants in the shopping
experience
Royalty-Free/CORBIS
23
Virtual Communities
  • Virtual community is a network of members sharing
    common interests that interact with each other
    electronically.
  • Examples
  • IVillage Women
  • Pricegrabbers.com Epinion.comproduct
    comparisons and reviews
  • Flypaper.com talks about fashion
  • ThisNext.com, Kaboodle.com, Wists.com,
    StyleHive.com social shopping that combines
    shopping and social networking

24
(No Transcript)
25
Virtual communities
  • Source. Future Trends in Microelectronics and IT,
    IBM Research from http//www-05.ibm.com/cz/events/
    power6/pdf/Ton20Engbersen_Trends20in20microelec
    tronics.pdf

26
What People Buy Over the Internet
  • Travel
  • PC/Electronics/Toys
  • Books/Software
  • Apparel
  • Home Garden
  • Jewelry Watches

27
What Merchandise Will Be Sold Successfully
Through Electronic Channel?
  • 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

28
How to Sell Over the Internet and eliminate
returns
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.

The McGraw-Hill Companies, Inc./Jill Braaten,
photographer
29
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

Technology increases conversion rates
30
My Virtual Model Try It On
  • Link to My Virtual Model H M

31
How Can the Electronic Channel Overcome
Limitations?
The Electronic Channel Provides Superior Benefits
for
  • GIFTS
  • Saves time
  • Saves effort in packing
  • Saves effort in delivery
  • SERVICES
  • No Shipping Problems
  • Examples
  • Travel websites
  • Banking
  • Newspapers

Janis Christie/Getty Images
32
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 theyre dissatisfied
    or satisfied with their electronic shopping
  • Store and website layout design tailored to
    customers buying habits

33
Perceived Risks of Electronic Shopping
Don Farrall/Getty Images
  • 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

34
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

35
Recreation Equipment Inc. (REI) A Leader in
Multichannel Retailing
36
Overcoming Existing Format
  • Size of the store is the greatest constraint for
    stores
  • 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.

37
Percentage of Cross Channel Shoppers
38
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

39
Who Has These Critical Resources? Capabilities
for Multi-Channel Retailing
40
Resources Possessed by Different Firm Types
41
Resources Possessed by Different Firm Types
42
Resources Possessed by Different Firm Types
43
Resources Possessed by Different Firm Types
44
Resources Needed to Compete Effectively in
Internet Retailing
  • Exciting and easy to use the website
  • Management Information Systems
  • Order processing and status
  • Customer database
  • Personalization software
  • But these resources were not enough!

45
Resources Needed to Compete Effectively in
Internet Retailing
  • Retailing Skills
  • Managing inventory
  • Editing assortment
  • Efficient Fulfillment Systems
  • Significant costs - last mile
  • Picking and packing individual orders
  • Handling returns - reverse distribution

46
Resources Needed to Compete Effectively in
Internet Retailing
  • Strong Brand Name and Image
  • Build traffic
  • Reduce customer perceived risk
  • Complementary Merchandise
  • One stop shopping
  • Lower shipping costs
  • Availability of Customer Information
  • Tailored presentations - personalization

47
Why Did Internet Retail Entrepreneurs Fail?
  • Lack of Skills to Succeed in Internet Retailing
  • Consumers Prefer Multi-Channel Retailers (Bricks
    and Clicks)

48
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 to
    homes
  • They did not posses sufficient resources to
    evolve into multichannel retailers

Digital Vision/Getty Images
49
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

Steve Cole/Getty Images
50
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

51
Impact of Internet Shopping on Store Sales
52
Ecommerce Myths
  • Low Cost of Entry
  • Overestimate Importance of Technology, Under
    Estimated Need for Traditional Resources
  • First Mover Wins
  • Gets Rid of the Middleman

53
Which Channel Is the Most Profitable? Cost
Drivers in Stores and Electronic Retailers
Stores
Electronic Retailers
  • 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
  • Bricks and Mortar, Salespeople
  • Attracting Customers to Store
  • Distribution Centers
  • Restocking Returned Merchandise

Few e-tailers are profitable
54
Will Electronic Channels Low Search Cost
Increase Price Competition?
  • Conventional Wisdom
  • Greater Comparison Shopping
  • Offerings Easily Compared on Price
  • Lower Search Costs gt More Emphasis on Price
  • Empirical Evidence
  • Substantial Price Dispersion
  • Lower Search Costs for Quality Informationgt Less
    Price Sensitivity
  • Lower Search Costs Lead to Better Decisions

55
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

Widespread Disintermediation Unlikely
56
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

57
Todays empowered consumers live in a
multi-channel world research products online,
buy offline, and demand service everywhere
Web Email 24x7 Visual
Consumers buy what they want, when they want,
wherever they want
Call Center Convenient Immediate
Brick Mortar Touch/Feel Experience
driven
Kiosks Visual Convenient
Customer
Handheld Devices Immediate 24x7
58
Channels Offer Complementary Benefits
59
Multichannel Shopping
60
Illustration of Multi-Channel Integration
  • Consumer does not find desired item in the store.
  • Consumer goes to kiosk to search for product
  • Kiosk links to chains web-site allowing
    consumers to find and purchase item
  • Consumer places order online for home delivery or
    store pick-up at a later time

Source Progressive Grocer, 01 Feb 00 Grocery
Headquarters, 01 Feb 00.
61
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

62
Shopping in the Future
63
Shopping Experience Personalization Potential
64
Integration Key to Multi-Channel Retailing
Shopping Experience
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