1. Web, Nonstore-Based, and Other Forms of Nontraditional Retailing
Chapter 6
Web, Nonstore-Based, and Other Forms of Nontraditional Retailing
Dr. Pointer

2. 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

3. 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

4. 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

5. Approaches to Retailing Channels Examples
Mail order
sporting goods
selling only thru
catalog
Single Channel
Retailing
Store-based
retailer with
one format
Mail order
sporting goods
selling thru
Catalog and Web
Store-based
retailer selling
thru catalogs
Multi- Channel Retailing
Mail order
sporting goods
selling thru
Catalog, Web &
Dept store
Store-based
retailer selling
thru catalogs and
web

6. 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

7. Nontraditional Retailing
Nontraditional retailing also includes formats that do not fit into the store and non-store based categories:
Video kiosks
Airport retailing

8. 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
Japan
Germany
Great Britain
France
Italy

9. Characteristics of Direct Marketing Customers
Typical Direct Marketing Consumer is
Married
Upper middle class
36-50 years old
Desires convenience, unique merchandise, good prices

10. Direct Marketing Categories
GENERAL
offer full lines of products from clothing to housewares
J.C. Penney
QVC
SPECIALTY
offer narrow product lines
L.L. Bean
Franklin Mint

11. 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

12. 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

13. 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.

14. Database Retailing- Data base key to success
Collection, storage, and usage of relevant customer information
name
address
background
shopping interests
purchase behavior
Observation of rule

15. 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

16. Increasing usage of dual distribution channels
More retailers adding web site, catalogs, Television ads to reach consumers and stay competitive.

17. 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

18. 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

19. 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

20. 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

21. 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

22. Steps in Executing a Direct Marketing Strategy
Business definition 2. Generating customers
Media selection 3. Presenting the message 4. Customer contact
5. Customer responses 6.Order fulfillment and
7. Measuring results -- Feedback

23. 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

24. 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

25. 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

26. 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

27. 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

28. 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

29. Table 6.1 Snapshot of U.S. Direct Selling Industry

30. Table 6.1 Snapshot of U.S. Direct Selling Industry

31. 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

32. 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

33. 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.

34. 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

35. 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

36. 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%

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

38. Information on Web Usage
Why Use the Web
information
entertainment
interactive communications
`Why Shop Online
selection
prices
convenience
fun

39. Reasons NOT to Shop Online
Trust
Fear
Lack of security
Lack of personal communication

40. 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

41. 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

42. 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

43. 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

44. 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

45. Questions