Multi-Channel Retailing

Dr. Vinita Sahay

The Multi-Channel Retailer

Retailer

Todays empowered consumers live in a multi-channel world -- Research products online, buy offline, and demand service everywhere Web & Email Consumers buy what they want, when they want, wherever they want
24x7 Visual

Call Center
Convenient Immediate

Brick & Mortar

Touch/Feel Experience driven

Kiosks

Customer

Visual Convenient

Pervasive
Immediate 24x7

Why are Retailers Using Multiple Channels to Interact with Customers?

Customer Want to interact in different ways Each channel offers a unique set of benefits for Customers

Unique Benefits Provided by Store Channel

Browsing

Touch and feel products

Personal service

Cash payment
Immediate gratification

Entertainment and social interaction

Benefits Provided by Catalog Channel

Convenience

Portability, easily accessible

Visual presentation

Safety

Unique Benefits Provided by Internet Channel

Convenience

Safety
Broad selection

Detailed information
Personalization

Problem-solving information

Will Consumers Shop Electronically from Home or

Go to the Mall?

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 $ 50 Billion Internet Retailing Just a Drop in the Bucket, But Growing Fast!

Electronic Channel Influences Shopping Behavior

Even though the electronic channel accounts for less than 2% of retail sales, the Internet is used extensively in the buying process
100 90 80 70 60 50 40 30 20 10 0 Findout about new products Search for product information Compare and Evaluate Products Purchase and Pay

In-Store Internet Mail-Order Television Visit from Home Catalog

Kiosk

Pervasive

Positive Outlook for Future

Younger people are growing up with computers view them as an appliance

55% of U.S. households have Internet access now and more have access at work
Women use the Internet almost as much as men now 40% of people buying cars go to the Internet for info before seeing a dealer

Impediments to Shopping On-Line

Technological concerns are becoming less important Access to Internet Bandwidth

Privacy, Security concerns

Are the benefits of shopping on-line greater than the benefits of going to a store?

Factors Affecting the Diffusion of an Innovation

Ease with which the innovation can be tried out
On-line access

Perceived risks of adoption

Security, Privacy

Perceived benefits compared to present alternatives (going to store or buying from catalogs)

Internet Users Across the Globe

Why Do People Patronize a Retailer?

Merchandise Assortments

Service
Convenience Information to make good selections

Price - Total cost to customer

Go to store, find right merchandise, return merchandise

Entertainment
Social interaction

Benefits of Electronic Channel

Increased Assortment

More Information to Evaluate Merchandise

Drill Down as Much as You Want Full motion Video

Personalization
Fred, the Super Sales Associate Try It On Virtually

Information for Solving Problems, Not Just Merchandise Characteristics

Virtual Communities

Virtual Communities
John Hagel III and Arthur G. Armstrong, Net Gain: Expanding Markets Through Virtual Communities. Boston: Harvard Business School Press, 1998

Definition: Virtual community is a network of members sharing common interests that interact with each other electronically.

Virtual Communities
Virtual community is a network of members sharing common interests that interact with each other electronically. Examples:
IVillage - Women Garden.Com - Gardeners Ibelieve.com

Value Proposition to Members

Full range of resources available to solve problem or satisfy from one source.
Integrate content and communication maximizing value of the available resources Generation and dissemination of member generated information -- increases quality, breadth and depth of information.

Value Proposition for Members

Meaningful personal relationships -Opportunity to interaction with other people with common interests draws people to community.
Fantasy and Entertainment

Access to competing vendors and publishers

Value Proposition for Commercial Organizer

Reduce cost of locating and targeting customers Reduce cost of motivating customers to make purchase decisions Opportunity for tailoring products, services,

Lower capital investment dont have to build store fronts.

Broader geographic reach

Benefits for Community Manager

Strengthen Brand Name, Reputation Build Customer Relationships Extend Database of Potential Customers Revenue Generation
Sell Merchandise Sell Services to Members Membership fees (Annual Charge for Access) Usage fee (Downloads, Time of Access) Advertising (Charge Advertisers)

Sources of Revenue
Subscription fees fixed monthly charge Usage fee charge based on usage Membership fees Content delivery fees charge to download information Service fee notification fee Advertising Transaction commissions Sales of membership list or access to members

Who Is Best Suited to Organize a Virtual Community?

Concerned Consumers

Content Providers - Vertical Publications

Suppliers

Retailers
Offering Competing Products Unbiased, Good Reputation Know How to Run a Business Selling to Consumers -- Primary Revenue Source

What Merchandise Will Be Sold Successfully Over the Internet

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

Why Did So Many e-tailers Fail?

Pure ETailer Assortments Limited Fulfillment Poor Catalog Retailers Limited Excellent Excellent Store-Based Vendors Retailers Excellent Poor Good Good Poor Poor

Poor Customer Information Poor Unique Merchandise Brand Name Poor

Good

Good

Excellent

Some Excellent

Some Excellent

Some Excellent

Store-based Retailers vs. Electronic Retail Entrepreneurs

Knowledge of Retailing
Assortment Planning
Distribution Systems

Reputation Customer Database Convenient Location for Picking Up, Returning Merchandise, Warranty Service and Installation Vendor Relationships

Advantages of Retailers vs. Manufacturers

Distribute Merchandise Directly to Customers

Provide Assortments Collect and Use Information about Customers

Widespread Disintermediation Unlikely

Summary
Present Electronic Retailing Does Not Reflect the Future Potential -- Electronic Retailing Will Attract a Significant Segment --Much More than Catalogs Penetration of Electronic Retailing Will Be A Function of the Degree To Which Retailers Take Advantage of the Unique Properties of the Internet -Personalization and Interactivity Search Agents Are Critical to Provide Consumer Benefits Store-Based Retailers Are Well Positioned to Exploit This Opportunity But Might Not

Reasons for Becoming a Multi-Channel Retailer

-Increase Share of Wallet -Overcome Limitations of Existing Format -Expand Market -Leverage Existing Assets -Brand Name, Inventory, Customer Database -Develop Insights in Customer Shopping Behavior

Issues Confronting a Multi-Channel Retailer

Maintaining Brand Image Across Channels Merchandise Assortment Offered in Each Channel Pricing Across Channels

Shopping in the Future

Customers Want to Recognized No Matter What Channel they Use

Internet

Call Center

Customers

Brick & Mortar

Customer Relationship

Pervasive

Kiosk

Integration Key to Multi-Channel Retailing

Create a Seamless Experience
Synchronized & consistent service regardless of channel

Know thy Customer

Needs and preferences One to One Marketing

Ordering Returns Refunds

Call Center Shopping Advice Customer Service

Make it Easy

Provide Support

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.