Transcript Non-store Retailing and Electronic Channels (Chp. 14)

Nonstore Retailing &
Electronic Channels
Chapter 14 with
Duane Weaver
Outline
• Nonstore retailing
– Catalog
– Direct-Selling Org’s (DSO’s)
• Electronic Channels
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Market Opp’s
Service Output Provision and Demand-Side Gaps
Channel Flow Performance and Supply-Side Gaps
Coordination Challenges
Non-Store Retailing: Catalogs
• E.g.: Sears Catalog, Land’s End…
• Service Outputs Offered:
– Break bulk
– Assortment and variety can vary widely (trend towards
specialty in-depth focused narrower range products)
– Smaller Catalogs – more targeted mailings
– Ultimate in Spatial Convenience (shop from home, yet
perhaps a delay without expense of overnight delivery)
Non-Store Retailing: Catalogs
• Segments served:
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Time starved working mother
Busy Single parents
People whose time and travel costs to get to a store are expensive
The Housebound
Others?
• Related Costs and Risks:
– Reliance on manufacturers if do not produce yourself
– Creation of the catalog (size, product coverage, segment
distribution…)
– Mailing List – look at lifetime value of mailing list and delete or add
customers
– Order Fulfillment – Logistics of picking and packing
– Stock-Outs – inventory management vs. delivery delays
– Merchandise returns – 6-15% in stores, 35% in catalog sales. Returns
are more expensive to manage (bulk broken) and ship
Direct-Selling Org’s (DSO’s)
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Direct Selling is “the sale of a consumer
product or service in a face to face manner
away from a fixed retail location”.
Typically high reliance on personal selling
E.G.’s: Amway, Mary Kay, Herbal Life, Avon,
and Tupperware.
Top 5 DSO countries - sales (Canada is 10th):
1.
2.
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4.
5.
Japan
USA
Brazil
Germany
Korea
Direct-Selling Org’s (DSO’s)
MLM- Multi-level Marketing (MLDSO)
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MLDSO distributors are compensated in three different ways:
1.
2.
3.
Mark-up on wholesale cost earnings
MLDSO commission paid per sale
MLDSO commission on sales made by subordinates (recruits)
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Balance growth of Network vs. Sale of products (often based on
personal consumption)
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Ilegal Pyramid Schemes:
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Fraudulent mechanisms by which new recruits are required to pay a
nonrefundable fee for becoming a distributor and the distributor’s only
reward is this fee (there is no sale and/or consumption of a product or
service). Ultimately the last layer of the pyramid will make no money
from anyone (population maximized), yet the highest in the pyramid
earns money from everyone.
Electronic Channels
…any channel that involves using the
Internet as a means of reaching the enduser or any channel for which the
consumer literally buys on-line. B2C or
B2B.
Market Potential for E-Channels
• Restrictive Market –
must be able to shop online.
• Strong Growth in some countries –
1998 33% of US online, whereas in 2003 56% of
US online
Service Outputs and DemandSide Gaps in E-Channels
• Positives:
– Any time of day or night spatial convenience
– More pleasant shopping experience, takes
less time
– Price-value promotions for online shopping
– Lower prices
– Broader access
– Consumer Control
Service Outputs and DemandSide Gaps in E-Channels
• Negatives:
– Product return challenges
– Stock availability
– Timely delivery (like catalog sales)
– Trust and Privacy
– Prefer face-to-face shopping
E-Channel Flow Performance
and Supply-Side Gaps
• New Fixed Costs Created
– Technical Infrastructure
– Warehousing or inventory arrangements
– Need for new intermediaries (E-bay, yahoo)
• May reduce costs (EDI integration, VMI, and CRP systems)
• Physical Possession – inventory, pick, pack, ship costs increase. 3rd
Party expert business is on the rise as a result (FedEx).
• Promotion – impacts on alternative channels such as retail stores
• Negotiation – may decrease or increase in intensity
• Risking – increased fear about disclosure of financial information online,
reduce risk of holding inventory (ship direct from manufacturer)
• Ordering – Technology has improved effectiveness of ordering
dramatically (reducing operating cost and increasing entry cost)
• Payment – existence of electronic payment from backing has facilitated
e-commerce growth. Trust issues have induced new 3rd party members
like PayPal.
E-Channel Coordination
Challenges
• Creates Dual Channel Conflicts related to Goals,
Domain and perception-of-reality.
• Bricks and Mortar in combination with online
resellers may exert greater strength in the
channel, increasing power conflicts.
• Confusion about online threat results in
restrictive channel behaviour precluding channel
success (e.g.: mall merchants restricted from
online expansion by mall leasor)
Thank You!