MULTICHANNEL RETAILING

Levy and Weitz

Chap.3

RETAIL CHANNELS The way a retailer sells and delivers

merchandise and services to its customers

The most common channel used by retailers:A. STORE CHANNEL (89.8%)B. NON STORE CHANNELS: the Internet (4.7%), catalogs (3.2%), direct selling (0.9%), automated retailing (0.9%), television home shopping (0.5%).

NON STORE CHANNEL:1. INTERNET CHANNEL A retail channel in which the offering of

products and services for sale is communicated to customers over internet.

Also called online retailing, electronic retailing and e tailing.

The internet facilitates rather then revolutionizes retailing: more than ¼ apparel shoppers look up basic

information about stores (location, hour and special events on retailer sites),

22% research mercahndise, 21% compare prices, 21% download coupons for use in stores.

2. CATALOG CHANNEL Non store retail channel in which the retail offering is

communicated to customers through a catalog mailed to customers.

½ of US consumers shop through catalog each year. The merchandise categories: drugs and beauty aids,

computers and software, clothing and accessories, furniture, housewares, books music, magazines.

Only 1.3% of catalogs mailed generate a direct sale. Catalogs share of sales is declining relative to the

internet. Catalogs role is shifting from primarily generating

sales to driving traffic to the Internet and physical stores

3. DIRECT SELLING A retail channel in which salespeople

interact with customers face-to-face in a convenient location, either at the customer’s home or at work.

The sales demonstrate merchandise benefits or explain services, take an order, and deliver the merchandise (cleaning products, cookware, cutlery, weights loss products, vitamins, cosmetics, skin care, etc).

4. AUTOMATED RETAILING (VENDING MACHINE) A retail channel in which merchandise or services

are stored in a machine and dispensed to customers when they deposit cash or use a credit card.

Typically placed at convenient and high-traffic locations.

80 % are from cold beverages, prepared food service, candy and snack.

Also appear in health clinics and dispense prescription medicines using a unique code assigned by the doctor to each patient.

Redbox rents dvds for 1$ a day in 22000 locations (inc. Mc D, walmart, 7-11, circle-K), and customers rents more than 7.5 million movies weekly, close to the sales eported by its mail –order rival Netflix.

5. TV HOME SHOPPING A retail channel in which customers watch a

TV network with programs that demonstrate merchandise and then place orders usually by telephone or internet.

Most of the purchase are made by a relatively small percentage of viewers.

Today’s consumer is interacting with multiple screens (smartphone/ laptop/ tablet).

On HSN’s Facebook page, we can ask questions, comments and chat as it happens, then get read on the air by customers favorite hosts.

BENEFITS OF RETAIL CHANNELS1. STORE CHANNELS: Touching and feeling products Personal service Risk reduction Immediate gratifications Entertainment and social experience Browsing Cash payment

2. CATALOG CHANNELS Safety and convenience Consumers can look at merchandise and

place an order from almost anywhere without needing a computer, mobile device or internet connection.

Consumers can refer to the information any time by simply picking it up.

Easier to browse through than websites. To augment its catalog channel, IKEA’s

2013 catalog illustrates the use of a retailer’s website.

3. THE INTERNET CHANNEL The addition of internet channels to traditional

store-based retailers and catalogers has improved their ability to serve customers and build a competitive advantage in several ways:1. Potential to offer a greater selection of products2. Provide more information3. Provide customers with more personalized

information about products and services4. Offer sellers the unique opportunity to collect

information about consumer shopping5. Provide opportunity to enter new markets

economically6. Provide information that they can use to improve

the shopping experience across all channels.

3.1. DEEPER AND BROADER SELECTION Customers can easily visit and select

merchandise from a broader array of retailers

Individual retailers websites typically offer deeper assortments of merchandise (more colors, brands and sizes) than available in store or catalogs

3.2. MORE INFORMATION Unlimited information Enables customers to solve problems

3.3. PERSONALIZATION The ability to economically personalized merchandise

offerings and information for each customers. Customers can format the information so that it can be

effectively used when they are comparing alternatives (side-by-side comparison format).

Provide live chats by clicking a button at any time and have an instant messaging e-mail or voice conversation.

Enables retailers to send a proactive chat invitation automatically to customers on site, the specific page the customers viewing, or a product on which customer has clicked.

An interactive web page can make suggestions to shoppers about additional items that they might like to consider

Some multichannels retailers are able tio personalized promotions and internet homepages on the basis of several attributes tied to the shopper’s current or previous web sessions such as: purchase histories, personal information and search behavior on the internet.

3.4. EXPAND MARKET PRESENCE Expand shops retailers and catalogers

market without having high cost . Attractive to retailers with strong brand

names but limited locations and distribution.

Customers would have not to travel vast distances to but the merchandise their carry.

3.5. PROVIDE INFORMATION TO IMPROVE SHOPPING EXPERIENCE ACROSS CHANNELS

All transactions through internet have the customers identification information needed to send the product to the customers as well as their search behavior.

It can be used to provide valuable insights into how and why customers shop and are dissatisfied or satisfied with their experiences.

By placing a “cookie” (a small computer program that collects information about computer usage) on customer’s hard drive, the retailer can monitor each mouse click.

This provide insights into what characteristics of products consumers considered and what products customers looked at but did not buy.

This information will helps retailer:design stores or websitescan determine whether a store or website

should be laid out brands, size, color or price point.

give suggestions about what items a customer might be interested in purchasing

Can provide unique promotions to individual customers

Many consumers concerned about credit card security. Thus, almost all retailers use sophisticated technologies to encrypt communications, and all major credit card companies provide consumer protection for retail transactions.

The security breaches can be far worse for retailers from which the card number was stolen. This can ruin a retailer’s reputation and possible expose it to legal liability.

Consumer also are concerned about the ability of retailers to collect their person information (sold it, send unwanted promotional materials online or mail)

3.6. PERCEIVED RISKS IN INTERNET SHOPPING

4. COMPARISON OF ELECTRONIC AND MOBILE PHONE INTERNET CHANNELS Mobile phone Benefits:

Customers can easily carry the device in their purses/ pockets and access the retailers website from anyplace, as long as there is a mobile phone connection available.

Retailers can determine where a customer is located and send location-relevant information to the customers such as promotions, to encourage customers to buy other products nearby the store or go to another area of the store.

Mobile phone Limitation: It has smaller screen and slower download speeds Consumers have to go through many more screen

when browsing or trying to locate information.

To improve shopping experience using mobile channels, many retailers have developed shopping apps (software applications).

It used to easily perform some specific functions available: The Amazon offers price product comparisons with

thousands of retailers. Its Snap It lets consume take photo of a product to

search for it. Targets make easy for consumers to scan barcodes and

find daily/ weekly deals., check product availability, search for nearby stores and set up text alerts for discount.

The use of tablets may provide the best trade-off between the portability of mobile phones and the navigation ease of website accessed by computers: On Anthropology's app, consumers not only can browse

items but also clip pictures of the most appealing options to add to their social networks, as well as check out detailed, thumbnail views of the offerings.

CHALLENGES:1. MULTICHANNELS SUPPLY CHAIN AND INFORMATIONS Multichannels retailers still struggle to provide an

integrated shopping experience because the various channels demand various skills, as well as unique resources.

Stores with supply catalogs and internet channels requires unique packaging, different transportation system and new intermediaries.

Many store-based retailers have a separete organizations to manage their internet and catalog channels. But as it operation mature, retailers tend to integrate all operations under one organizations: Walmart and JCPenney initially had separate organizations for their internet channels, but subsequently integrated them with stores and catalog.

2. CENTRALIZED VS DECENTRALIZED The degree to which retailers should

integrate the operations: of the channels, have different organizations for each

channel, complete integrations (selling the same

products at the same prices through the same distributions system for all channels)

having different organizations manage each channel so that the channels are tailored to different target markets,

pursue a strategy at one end of the range or the other.

3. CONSISTENT BRAND IMAGE ACROSS CHANNELS Need to provide a consistent brand image of

themselves and their private label merchandise across all channels, ex: Patagonia reinforces its image of selling high

quality environmentally friendly sports equipment in its stores, catalogs and website. Each emphasizes function, not fashion, use recycle polyester in many of its clothes, only organic, not pesticide-intensive, and cotton. Its web blog is dedicated to essays and other features on environmental activism, innovative design and sports.

Build A Bear Workshop uses multiple channels to build and reinforces its image.

4. MERCHANDISE ASSORTMENT Different assortments for each of

channels : The internet channel can have a much larger assortment and can satisfy the needs of a larger variety of customers groups.

The channels also differ in terms of their effectiveness in generating sales for different types of merchandise:Look and see attributes: price, color, grams

through internetTouch and feel attributes: taste, smell in

store

5. PRICING In some cases, retailers need to adjust

pricing strategy because of the competition they face in different channels although many customers expect same price across channels.

Multichannel retailers may have difficulties sustaining regional price differences when customers can easily check prices on the internet.

6. REDUCTION OF CHANNEL INTEGRATION The retailer will suffer if customers

gather information from one of its channels, then buy from a channel hosted by competitor.

The retaining customers remains: customers search price and product information in internet, then purchase it in stores.

Showrooming: a customer goes into a store to learn about different brands and products and then searches the internet for the same product sold at lower price.

To reduce showrooming:1. Providing better customer service2. Offering uniquely relevant information

based on proprietary data the retailer has collected about the customers

3. Promoting private-label merchandise that can be purchase only from the retailer.

FUTURE MULTICHANNEL SHOPPING Shopping experience scenario: having a

customer database shared by all channel and integrated across all systems.

Supporting the shopping experience: some new technologies that will exist in the store of the future such as self checkout and personalized virtual reality displays.

THANK YOU