Chapter 3. Multi-Channel Retailing. The World of Retailing. Introduction to Retailing. Types of Retailers. Multi-Channel Retailing. Customer Buying Behavior. Questions. What are the unique customer benefits offered by the three retail channels – stores, catalogs, and the Internet?
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Introduction to Retailing
Types of Retailers
Customer Buying Behavior
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.
Steve Cole/Getty Images
The McGraw-Hill Companies, Inc./Andrew Resek, photographer
Digital Vision / Getty Images
Each channel offers a unique set of benefits for CustomersWhy are Retailers Using Multiple Channels to Interact with Customers?
Consumers buy what they want,
When they want,
Wherever they want
- 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
Source: Forrester, State of Consumers and Technology, 2006
Technological concerns are becoming less important
Are the benefits of shopping on-line greater than the benefits of going to a store?
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
Source. Future Trends in Microelectronics and IT, IBM Research from http://www-05.ibm.com/cz/events/power6/pdf/Ton%20Engbersen_Trends%20in%20microelectronics.pdf
Home & Garden
Jewelry & Watches
Through Electronic Channel?
How Can the Electronic Channel Overcome Limitations?
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
Use technology to convert “touch and feel” information into “look and see” information
conversion rates: % of consumers who buy the product after viewing it
Technology increases conversion rates
Link to My Virtual Model H & M
The Electronic Channel Provides Superior Benefits for
Janis Christie/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
Don Farrall/Getty Images
Size of the store is the greatest constraint for stores
Store based retailers face inconsistent execution
To effectively operate and realize the benefits of multi-channel retailing, firms need to have skills in:
But these resources were not enough!
They had skills in web design
They had skills in systems to manage transactions
Digital Vision/Getty Images
Steve Cole/Getty Images
Attracting Customers to Store
Restocking Returned Merchandise
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 MerchandiseWhich Channel Is the Most Profitable?Cost Drivers in Stores and Electronic Retailers
Few e-tailers are profitable
Advantages of Retailers vs. Manufacturers
Widespread Disintermediation Unlikely
Web & Email
Consumers buy what they want, when they want, wherever they want
Brick & Mortar
• Experience driven
Source: Progressive Grocer, 01 Feb 00; Grocery Headquarters, 01 Feb 00.