Transcript Chapter 1

Chapter 6
Web, Nonstore-Based, and Other Forms of
Nontraditional Retailing
Dr. Pointer
Chapter Objectives
To contrast single-channel and multichannel 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
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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
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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
Mail order
sporting goods
selling only thru
catalog
Single
Channel
Retailing
Store-based
retailer selling
thru catalogs
Store-based
retailer selling
thru catalogs and
web
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Mail order
sporting goods
selling thru
Catalog and Web
Mail order
sporting goods
selling thru
Catalog, Web &
Dept store
MultiChannel
Retailing
Nonstore Retailing
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
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Nontraditional Retailing
Nontraditional retailing also
includes formats that do not fit into
the store and non-store based
categories:
Video kiosks
Airport retailing
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Direct Marketing
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
*France
* Japan
* Germany
*Italy
* Great Britain
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Characteristics of Direct
Marketing Customers
Typical Direct Marketing Consumer is
•
•
•
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Married
Upper middle class
36-50 years old
Desires convenience, unique
merchandise, good prices
Direct Marketing Categories
GENERAL
SPECIALTY
• offer full lines of
• offer narrow product
products from clothing lines
to housewares
– J.C. Penney
– QVC
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– L.L. Bean
– Franklin Mint
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 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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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; computerbased 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
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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
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Steps in Executing a Direct
Marketing Strategy
1. Business definition
2. Media selection
2. Generating customers
3. Presenting the message
5. Customer responses
6.Order fulfillment and
7. Measuring results -- Feedback
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4. Customer contact
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)
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 Freestanding
displays
 Ads or programs in
mass media
 Banner ads or hot
links on the Web
 Video kiosks
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
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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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Snapshot of
U.S. Direct Selling Industry
Table 6.1
Major Product Groups
% of Industry
Home/ family care products
33.7
Personal care products
26.4
Services
16.9
Wellness products
16.5
Leisure/ educational
products
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6.5
Snapshot of
U.S. Direct Selling Industry
Table 6.1
Place of Sales
% of Industry
In the home
64.4
Over the phone
14.7
In a workplace
8.7
Over the Internet
5.5
Other
6.7
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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 cardoperated 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
Project a retail presence
Enhance image
Generate sales
Reach geographically-dispersed
customers
Provide information to customers
Promote new products
Demonstrate new product benefits
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The Role of the Web_2
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
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Web-Based U.S.
Retail Sales
Figure 6.6
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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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
– information
– entertainment
– interactive
communications
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 `Why Shop Online
– selection
– prices
– convenience
– fun
Reasons NOT to Shop Online
Trust
Fear
Lack of security
Lack of personal communication
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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
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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
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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Questions
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