Non Store Retailing

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Learning Objectives (1 of 2)

6.1 To contrast single-channel and multi-channel retailing

6.2 To look at the characteristics of the three major retail
institutions involved with non store-based strategy
mixes: direct marketing, direct selling, and vending
machines – with an emphasis on direct marketing

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Learning Objectives (2 of 2)

6.3 To explore the emergence of electronic retailing through the World Wide Web
6.4 To discuss two other nontraditional forms of retailing: video kiosks and airport
retailing

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 Non Store Retailing
Suggested readings
• Retail Management
by
Berman, Evans, Chatterjee & Srivastava
13th edition, Chapter 5

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Approaches to Retailing
Channels

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Non-store Retailing
• Retailing strategy that is not store-based
• direct marketing
• Web-based retailing is the fastest- growing area
• M/SMS-commerce
• Social commerce

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 Direct Marketing
• Customer is initially exposed to a good or service through a non-
personal medium and then orders by mail, phone, fax, smart phone,
or computer
• Annual U.S. sales exceed $475 billion (including the Web)
• Other leading countries include
• Japan
• Germany
• Great Britain
• France
• Italy

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Characteristics of Direct
Marketing Customers
• Married
• Upper middle class
• 35-50 years old
• Have access to wifi and broadband Internet
• Are multi-screen shoppers
• Desire convenience, unique items, good
prices

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 Strategic Business Advantages
of Direct Marketing
• Reduced costs
• Lower prices
• Large geographic coverage
• Convenient to customers
• Ability to pinpoint customer segments
• Ability to eliminate sales tax for some
• Ability to supplement regular business without additional outlets

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 Strategic Business Limitations
of Direct Marketing
• Products often cannot be examined prior to purchase
• Costs may be underestimated
• Response rates to catalogs under 10%
• Clutter exists
• Long lead time required
• Industry reputation sometimes negative

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 Clickstream Retailing
• Collection, storage, and usage of relevant customer information
• name
• address
• background
• shopping interests
• purchase behavior
• Observation of 80-20 rule

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 Emerging Trends
• Evolving activities
• Changing customer lifestyles
• Increasing competition
• Increasing usage of dual distribution channels
• Changing media roles, technological advances, and global penetration

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Selection Factors by Customers
• Company reputation and image
• Ability to shop whenever consumer wants
• Types of goods and services
• Availability of toll-free phone number, Web site or
mobile app for ordering
• Credit card acceptance
• Speed of promised delivery time
• Competitive prices
• Satisfaction with past purchases and good return policy
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Executing a Direct Marketing
Strategy

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 Media Selection

• Printed catalogs • Freestanding displays

• Direct-mail ads and • Ads or programs in
brochures
mass media
• Inserts with monthly credit
card and other bills • Banner ads or hot links
(statement stuffers) on the Web
• Video kiosks

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 Outcome Measures (RFM)
• Overall response rate (R)
• Frequency of purchases (F)
• Average purchase amount (M)
• Sales volume by product category
• Value of list brokers

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 Direct Selling
• Direct selling includes personal contact with consumers in their
homes (and other nonstore locations such as offices) and phone
solicitations initiated by retailer.
• Annual sales of $35 billion in the U.S., where 18.2 million people are
employed (more than 90 percent part-time).
• Annual foreign revenues of $185 billion, generated by 100 million
salespeople.

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A Snapshot of the U.S. Direct
Selling Industry
Major Product Groups (as a percent of sales) 2012 2015
Home and family care products/home durables 24.4 16.3
Wellness (weight loss products, vitamins, etc.) 23.0 33.6
Personal care 19.4 17.1
Services 19.2 21.9
Clothing 11.0 8.8
Leisure/educational (books, encyclopedias, 3.0 2.3
toys/games, etc.

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Web Strengths: Consumer Appeal

Using the Web Shopping Online

• Information • Low search costs
• Entertainment • Endless selection
• Interactive communications • Prices
• Personalization • Convenience
• Peer-reviews • Fun

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Global Consumers’ Online Retail Purchases, 2016
(Selected Product Categories)

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 How has the World Wide Web
Changed Shopping Behavior?
• Decoupled ordering, payment, and delivery
• Website design/interaction – drives retailer image
• Fulfillment/reliability: 24/7/365. Buy, pay, pick-up anywhere, anytime
• Customer service – info from retailer, must also provide peer-reviews
• Security/privacy – personalize for “me only when I need it”

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How Payment has Decoupled
From Ordering and Pick-Up
Purchase Post
Need Information
Store Purchase
Recognition Search Ordering + Payment + Pick-up Evaluation

Remote channels Delivery+ Post

Need Information
Ordering Purchase
(pre-credit card) Recognition Search Payment Evaluation

Remote Ordering + Post

Need Information
channels Purchase
Recognition Search Payment Delivery Evaluation
(post-credit card)

Paymen
t

Pick-up/ Post
Need Information
Cross-channel Ordering Purchase
Recognition Search Delivery Evaluation

Consumers select channels based on when and where they

want to pay
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 Cross-Channel Shopping
Behavior (Payment and Pickup
Decoupled)
Channels Paym ent Pick-up/
Post
Purchase
Need Inform ation Ordering
Service
used by Recognition Search Delivery

Firms
Purchase transaction stages
Store

Website
(O+P)online – (Pickup)store:
Social Order and pay online, pick-up in-
store

Mobile

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 Reasons NOT to Shop Online
• Online shopping accounts for only 8% overall retail spend!
• Lack of trust in retailer
• Fear of fraud
• Lack of security (credit card access)
• Lack of personal communication
• High shipping costs

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 Recommendations for Web
Retailers

• Develop or exploit a well-known, trustworthy retailer name

• Tailor the product assortment for Web shoppers
• Enable the shopper to “click” as little as possible-Amazon.com one-
click option
• Provide an effective search engine
• Permission-based use of customer information

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 Recommendations for Web
Retailers

• Include unedited ratings and reviews for customers to increase

consumer information and to reduce risk
• Personalize the shopping experience for each shopper based on past
purchases and previous Web searches
• Include free shipping or one time shipping fee for unlimited shipping

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 Optimizing Customers’ Web-
Based Service Experience
• Service experience based on delivery speed, speed with which
questions are answered, customer’s ability to find suitable product
and accurate portrayal of good (features, color, style and fit)

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 Optimizing Customers’ Web-
Based Service Experience
• Access to call center personnel through instant messaging and Email
—L.L.Bean’s “click and call” features
• Personalization--Use of computer algorithms to show suggested
products
• Customer reviews
• One-click checkout
• Demonstration videos
• Amazon Remembers-matches photos to actual products available on
amazon.com

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 Optimizing Customers’ Web-
Based Service Experience
• Zappos– full service online shoe retailer
• Free returns, free online shipping
• 365 day return policy
• Eliminated drop shipping due to inability to control on-time delivery
• Manage 1,417 brands, 152,000 styles, 824,000 UPC codes
• 4 week new hire training program + 2 weeks in the call center

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Creating Shopping Experience
for Amazon Customers
Please click URL to view:
https://youtu.be/PeWzMmmDlQM

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 Omni channel Retailing
• Seeks synergies among formats (get product information on Web,
order through catalog, pick-up in store, use kiosks for out-of-stock
merchandise)
• Retailer views each channel as creating value (immediacy of store,
24/7 of Web, long lasting impression of catalog)
• Channels are viewed as complementary, not competitive (Costco Web
site vs. store)

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 Principles of Omni Channel
Retailing
• Use same product identification in all channels
• Price goods the same in all channels
• Assess infrastructure economies. Direct marketer data base and
delivery system.
• Cross promote goods across channels.
• Use suitable partners (Amazon to sell, Fedex to deliver)

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 Nontraditional Retailing
• Nontraditional retailing includes hybrid formats that do not fit into
store and nonstore-based categories to extend retailers’ footprint :
– Vending machines
• Video kiosks
• Airport retailing

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 Vending Machines
• Vending machines are a cash- or card-operated retailing format that
sells goods and services.
• Eliminates the use of sales personnel and allows 24-hour sales.
Lowers costs and risks.
• Machines placed wherever convenient for consumers, but not for
store.
• 95 percent of the $50 billion in annual U.S. vending machine sales
involve hot/cold beverages and food items.

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Advanced Shopping Technology
at Amazon Go
Please click URL to view:
https://youtu.be/NrmMk1Myrxc

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 Video Kiosks
• A video kiosk is a freestanding, interactive, electronic computer
terminal that displays products and related information.
• Some kiosks are located in stores to enhance customer service; others
let consumers place orders.
• There are 2.2 million video kiosks in use throughout the world, nearly
1 million of which are Internet-connected.

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 Airport Retailing
• Large group of prospective shoppers
• Captive audience
• Strong sales-per-square-foot of retail space
• Strong sales of gift and travel items
• Difficulty in replenishment
• Longer operating hours
• Duty-free shopping possible

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Airport Omnichannel E-
Commerce
Please click URL to view:
https://youtu.be/x1u6v0_9IQE

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