Transcript Chapter 1
Chapter 6
Web, Nonstore-Based, and Other Forms of Nontraditional Retailing
Dr. Pointer
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Chapter Objectives
To contrast single-channel and multi channel retailing
To look at the characteristics of the three major retail institutions involved with nonstore-based strategy mixes: direct marketing, direct selling, and vending machines – with an emphasis on direct marketing
Chapter Objectives_2
To explore the emergence of electronic retailing through the World Wide Web
To discuss two other nontraditional forms of retailing: video kiosks and airport retailing 6-3
Different Channels for Retailing
• Single Channel – sells to consumers through one retail format- can be store based or non store based • Multi channel – retailer sells to consumers through multiple retail formats : Wal-Mart selling thru its Wal Mart stores, Sam’s Club, Web and Neighborhood Markets
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Approaches to Retailing Channels Examples
Store-based retailer with one format Store-based retailer selling thru catalogs Store-based retailer selling thru catalogs and web
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Mail order sporting goods selling only thru catalog Mail order sporting goods selling thru Catalog and Web Mail order sporting goods selling thru Catalog, Web & Dept store Single Channel Retailing Multi Channel Retailing
Nonstore Retailing
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Non store retailing is when they use strategy mixes that are not store-base to reach consumers and complete transactions
It exceeds $300 billion annually
78% comes from direct marketing
Web-based retailing is fastest growing area
Nontraditional Retailing
Nontraditional retailing also includes formats that do not fit into the store and non-store based categories:
Video kiosks
Airport retailing 6-7
Direct Marketing
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Customer is first exposed to a good or service through a nonpersonal medium and then orders by mail, phone, fax, or computer Annual U.S. sales exceed $235 billion Other leading countries with strong DM * Japan * France * Germany * Great Britain * Italy
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Characteristics of Direct Marketing Customers
Typical Direct Marketing Consumer is • • • •
Married Upper middle class 36-50 years old Desires convenience, unique merchandise, good prices
Direct Marketing Categories
GENERAL
•
offer full lines of products from clothing to housewares
•
offer narrow product lines
– –
J.C. Penney QVC
– –
SPECIALTY L.L. Bean Franklin Mint 6-10
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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
Strategic Business Limitations of Direct Marketing
Products 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 6-12
Domain of Direct Marketing
• Direct marketing is a form of retailing in which a consumer is exposed to a good or service through a nonpersonal medium and then orders by mail, phone, fax or computer.
• Viewed as an interactive system • DM includes any catalog, mail, TV, radio, magazine, newspaper, phone directory, fax or ad; computer based transaction or any non personal contact that stimulates customers to place a order by phone, fax, mail or computer.
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Database Retailing-
Data base key to success
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 in Direct marketing
Evolving activities
Changing customer lifestyles
Increasing competition
Increasing usage of dual distribution channels
Changing media roles, technological advances, and global penetration
Increasing usage of dual distribution channels • More retailers adding web site, catalogs, Television ads to reach consumers and stay competitive.
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Changing media roles, technological advances, and global penetration • Many firms printing multi catalogs, specialogs • Specialogs catalogs emphasizes a limited number of items and has reduced postage and productions costs • Infomercials is a program length TV commercial that airs on cable or broadcast TV, often during late night fringe - (30-60 minutes in length) • Technology allows for better targeting with special media
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Evolving activities
• Technology is a big factor in success of nonstore retailing • Multi-channel retailing is utilized by many more firms today • Increased focus on data-based retailing • Firms have privacy policies
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Changing customer lifestyles
• Consumers’ life-styles have shifted dramatically over the past 35 years • Large number of working women • Therefore, they don’t have time to shop as before. That’s why some forms of nonstore retailing is gaining popularity
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Increasing competition • More companies now compete in direct marketing format • More companies in market due to lower entry costs and ease of operation • Direct marketing lures many small firms which are under capitalized and have high failure rates
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Factors consumers consider to Select Direct Marketer
Company reputation and image
Ability to shop whenever consumer wants
Types of goods and services
Availability of toll-free phone number or Web site for ordering
Credit card acceptance
Speed of promised delivery time
Competitive prices
Satisfaction with past purchases and good return policy 6-21
Steps in Executing a Direct Marketing Strategy
1. Business definition 2. Media selection 2. Generating customers 3. Presenting the message 4. Customer contact 5. Customer responses 6.Order fulfillment and 7. Measuring results -- Feedback
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Executing a Direct Marketing Strategy
• Business definition – What format? single channel or multi channel format • Generating customers – How will you get your customer database? – several ways to do it (pg 136) • Media Selection - Several alternatives available – one or multiple types of media
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Media Selection
Printed catalogs
Direct-mail ads and brochures
Inserts with monthly credit card and other bills (statement stuffers)
Freestanding displays
Ads or programs in mass media
Banner ads or hot links on the Web
Video kiosks 6-24
Executing a Direct Marketing Strategy Cont’d
• Presenting message – develop an effective message that will engender interest, create right image, provide data on products • Customer contact – Do you contact all in data base or selective ones? How often to contact?
• Customer response I one of 3 ways, order, request more information, or ignore the message
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Outcome Measures
Overall Response Rate
Average Purchase Amount
Sales Volume by Product Category
Value of list brokers
Important to analyze results because feedback can help to update data base, product mix and promotion programs
Issues Facing Direct marketers
• Many people dislike one or more aspects of direct marketers • Most dissatisfied with late deliveries, deceptive claims, and broken or damage merchandise • Most people would like to receive less direct mail pieces although most open all mail • Consumers are concerned with their personal information being sold • Direct marketers must battle the legal environment to make sure more restrictive laws are not passed
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Direct Selling
( a form of nonstore retailing
)
• Direct selling includes both personal contact with consumers in their homes and other non store locations such as offices and phone solicitations initiated by a retailer • $27 billion in annual sales • Mkt strategy emphasizes convenient shopping and a personal touch
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6-29 Table 6.1
Snapshot of U.S. Direct Selling Industry
Major Product Groups Home/ family care products Personal care products Services Wellness products Leisure/ educational products % of Industry 33.7
26.4
16.9
16.5
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6-30 Place of Sales In the home Over the phone In a workplace Over the Internet Other Table 6.1
Snapshot of U.S. Direct Selling Industry
% of Industry 64.4
14.7
8.7
5.5
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Reasons for Slow Growth of Direct Selling
• More women working • Better job opportunities in other fields have reduced pool of qualified people • Firm’s mkt coverage is limited by size of sales force • Sales productivity is low and average sale is small • 25-50% of sales is commission to sales people which makes prices higher to consumers • Various legal restrictions apply due to high pressure and often deceptive tactics of sales people
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Vending Machine Sales
(form of nonstore retailing)
• Vending machines is a cash or card operated retailing format that dispenses goods or services • Eliminates the need for sales personnel • $40 billion in annual U.S. sales • 85 % of merchandise is beverages • Cigarette sales have gone from 25% of sales to 2% • Items over $1.50 don’t sell well
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Electronic Retailing is growing
• Internet is a global electronic super highway of computers networks that use a common protocol and are linked by telecommunication lines and satellite • World Wide Web (Web) is a way to access information on the internet, whereby users use easy to use Web addresses and web pages.
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The Role of the Web
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Project a retail presence
Enhance image
Generate sales
Reach geographically-dispersed customers
Provide information to customers
Promote new products
Demonstrate new product benefits
The Role of the Web_2
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Provide customer service (e.g., e-mail)
Be more “personal” with consumers
Conduct a retail business efficiently
Obtain customer feedback
Promote special offers
Describe employment opportunities
Present information to potential investors, franchisees, and the media
Figure 6.6
Web-Based U.S. Retail Sales
Greatest percentage is for computer hardware/software -25% Apparel is only 7.5 % Books and magazines 7.0% Electronics and appliances – 5.4%
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6-37 Figure 6.8 Five Stages of Developing a Retail Web Presence 1. Brochure Web Site 2. Commerce Web Site 3. Integrated Web Site 4. The ‘Webified’ Store 5. Site Integrated with Manufacturer Systems
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Information on Web Usage
Why Use the Web
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information entertainment interactive communications
`Why Shop Online
– – – –
selection prices convenience fun
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Reasons NOT to Shop Online
Trust Fear Lack of security Lack of personal communication
Characteristics of Web Users
• About equal number of males and females 47% Females vs. 53% males • Educated with good income average income of $50K or above 75% have at least attended college • Those shopping on web, over half spend $250 or more and 67% shop at 5 times
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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
Provide a solid search engine
Use customer information 6-41
Other nontraditional forms of Retailing
• Video Kiosks- a freestanding, interactive, electronic computer terminal that displays products and related information on a video screen • 1.5 mm in U.S. and account for $3 billion in sales • Very flexible and can be located in many different places
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Other nontraditional forms of Retailing
• Airport Retailing – major retailing mecca • Large potential markets • Variety of retailers such as fast food, gift shops and now some mall specialty retailers are moving to the airport.. Walden Bookstore • Generates annual sales of $6 billion
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Features of Airport Retailing
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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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