5 Today’s empowered consumers live in a multi-channel world -- Research products online, buy offline, and demand service everywhereWeb &• 24x7• VisualConsumers buy what they want, when they want, wherever they wantCall Center• Convenient• ImmediateBrick & Mortar• Touch/Feel• Experience drivenFirst, there are major changes in customer buying behavior.I may want to buy a product at 10pm, through my Web browser, or you may want to buy through a call center, or you may want to buy by visiting with a field sales professional or local reseller.I also may want to work across multiple channels, to start my purchase over the Web, then later contact the call center, and finally close the deal with a field sales representatives in my office.Kiosks• Visual• ConvenientCustomerPervasive• Immediate• 24x7
6 Why are Retailers Using Multiple Channels to Interact with Customers? Customer Want to interact in different waysEach channel offers a unique set of benefits for Customers
7 Unique Benefits Provided by Store Channel BrowsingTouch and feel productsPersonal serviceCash paymentImmediate gratificationEntertainment and social interaction
8 Benefits Provided by Catalog Channel ConveniencePortability, easily accessibleVisual presentationSafety
9 Unique Benefits Provided by Internet Channel ConvenienceSafetyBroad selectionDetailed informationPersonalizationProblem-solving information
10 Electronically from Home Will Consumers ShopElectronically from HomeorGo to the Mall?
11 What’s the Big Deal About Shopping on the Internet? $2.5 Trillion US Retail Sales$200 Billion Catalog and Direct Sales$ 4 Billion TV Home Shopping$ 50 Billion Internet RetailingJust a Drop in the Bucket, But Growing Fast!
12 Electronic Channel Influences Shopping Behavior Even though the electronic channel accounts for less than 2% of retail sales, the Internet is used extensively in the buying process
13 Positive Outlook for Future Younger people are growing up with computers view them as an appliance55% of U.S. households have Internet access now and more have access at workWomen use the Internet almost as much as men now40% of people buying cars go to the Internet for info before seeing a dealer
14 Impediments to Shopping On-Line Technological concerns are becoming less importantAccess to InternetBandwidthPrivacy, Security concernsAre the benefits of shopping on-line greaterthan the benefits of going to a store?
15 Factors Affecting the Diffusion of an Innovation Ease with which the innovation can be tried outOn-line accessPerceived risks of adoptionSecurity, PrivacyPerceived benefits compared to present alternatives (going to store or buying from catalogs)
17 Illustration - Judy Jamison - Part 1 Judy Jamison sits in front of her home electronic center reviewing her engagement calendar displayed on her TV screen. She sees that she has accepted an invitation to a formal cocktail party on Friday night and decides to buy a new dress for the occasion. She switches to her personal electronic shopper, FRED, and initiates the following exchange:FRED: Do you wish to browse, go to a specific store, or buy a specific item?Judy: Specific item.FRED: Type of item?Judy: Black dress.FRED: Occasion? (menu appears on screen)Judy: Formal cocktail party
18 Illustration - Judy Jamison - Part 2 FRED: Price range? (menu appears)Judy: $300 $500FRED: 497 items have been identified. How many do you want to review?Judy: 5Five pictures of Judy in each dress appear on the screen with the price, brand name, and the IHS retailer selling it listed beneath each one. Judy clicks on one of the dresses and it is enlarged on the screen. Another click and Judy views the dress from different angles. Another click and specifications such as fabric and laundering instructions appear. Judy repeats this routine with each dress. She selects the one she finds most appealing. FRED knows her measurements and picks the size that fits her best.
19 Illustration - Judy Jamison - Part 3 FRED: How would you like to pay for this? (menu appears)Judy: American ExpressFRED: Nieman Marcus [the firm selling the dress Judy selected] suggests a Xie scarf and Koslow belt to compliment the dress.[Judy clicks on the items and they appear on the screen. Judy inspects these items as she inspected the dresses. She decides to purchase both accessories. FRED then asks Judy about delivery. Judy selects two day delivery at a cost of $5.00]FRED: Just a reminder. You have not purchased hosiery in days. Do you wish to reorder at this time?Judy: YesFRED: Same shades?
20 Why Do People Patronize a Retailer? Merchandise AssortmentsServiceConvenienceInformation to make good selectionsPrice - Total cost to customerGo to store, find right merchandise, return merchandiseEntertainmentSocial interaction
21 Benefits of Electronic Channel Increased AssortmentMore Information to Evaluate MerchandiseDrill Down as Much as You WantFull motion VideoPersonalizationFred, the Super Sales AssociateTry It On VirtuallyInformation for Solving Problems, Not Just Merchandise CharacteristicsVirtual Communities
23 Virtual CommunitiesJohn Hagel III and Arthur G. Armstrong, Net Gain: Expanding Markets Through Virtual Communities. Boston: Harvard Business School Press, 1998Definition: Virtual community is a network of members sharing common interests that interact with each other electronically.
24 Virtual CommunitiesVirtual community is a network of members sharing common interests that interact with each other electronically.Examples:IVillage - WomenGarden.Com - GardenersIbelieve.com
26 Value Proposition to Members Full range of resources available to solve problem or satisfy from one source.Integrate content and communication maximizing value of the available resourcesGeneration and dissemination of member generated information -- increases quality, breadth and depth of information.
27 Value Proposition for Members Fantasy and EntertainmentMeaningful personal relationships -- Opportunity to interaction with other people with common interests draws people to community.Access to competing vendors and publishers
28 Value Proposition for Commercial Organizer Reduce cost of locating and targeting customersReduce cost of motivating customers to make purchase decisionsOpportunity for tailoring products, services,Lower capital investment – don’t have to build store fronts.Broader geographic reach
29 Benefits for Community Manager Strengthen Brand Name, ReputationBuild Customer RelationshipsExtend Database of Potential CustomersRevenue GenerationSell MerchandiseSell Services to MembersMembership fees (Annual Charge for Access)Usage fee (Downloads, Time of Access)Advertising (Charge Advertisers)
30 Sources of Revenue Subscription fees – fixed monthly charge Usage fee – charge based on usageMembership feesContent delivery fees – charge to download informationService fee – notification feeAdvertisingTransaction commissionsSales of membership list or access to members
31 Who Is Best Suited to Organize a Virtual Community? Concerned ConsumersContent Providers - Vertical PublicationsSuppliersRetailersOffering Competing ProductsUnbiased, Good ReputationKnow How to Run a Business Selling to Consumers -- Primary Revenue Source
32 What Merchandise Will Be Sold Successfully Over the Internet “Look and See” attributes vs. “Touch and Feel” attributes (?)Degree to which information can be used to predict satisfaction prior to purchaseGiftsServicesMight not need to “Touch and Feel”“Touch and Feel” not useful - GiftsSuperior presentation of “Touch and Feel”Branding
34 Store-based Retailers vs. Electronic Retail Entrepreneurs Knowledge of RetailingAssortment PlanningDistribution SystemsReputationCustomer DatabaseConvenient Location for Picking Up, Returning Merchandise, Warranty Service and InstallationVendor Relationships
35 Widespread Disintermediation Unlikely Advantages of Retailers vs. ManufacturersDistribute Merchandise Directly to CustomersProvide AssortmentsCollect and Use Information about CustomersWidespread Disintermediation Unlikely
36 SummaryPresent Electronic Retailing Does Not Reflect the Future Potential -- Electronic Retailing Will Attract a Significant Segment --Much More than CatalogsPenetration of Electronic Retailing Will Be A Function of the Degree To Which Retailers Take Advantage of the Unique Properties of the Internet -Personalization and InteractivitySearch Agents Are Critical to Provide Consumer BenefitsStore-Based Retailers Are Well Positioned to Exploit This Opportunity But Might Not
37 Reasons for Becoming a Multi-Channel Retailer -Increase Share of Wallet-Overcome Limitations of Existing Format-Expand Market-Leverage Existing Assets-Brand Name, Inventory, Customer Database-Develop Insights in Customer Shopping Behavior
38 Issues Confronting a Multi-Channel Retailer Maintaining Brand Image Across ChannelsMerchandise Assortment Offered in Each ChannelPricing Across Channels
40 Customers Want to Recognized No Matter What Channel they Use InternetCall CenterCustomerRelationshipCustomersBrick & MortarPervasiveKiosk
41 Integration – Key to Multi-Channel Retailing Create a SeamlessExperienceMake it EasyProvide SupportKnow thyCustomer•OrderingReturnsRefundsCall CenterShoppingAdviceServiceNeeds andpreferencesOne to OneMarketingSynchronized &consistent serviceregardlessof channel
42 Illustration of Multi-Channel Integration Consumer does not find desired item in the store.Consumer goes to kiosk to search for productKiosk links to chain’s web-site allowing consumers to find and purchase itemConsumer places order online for home delivery or store pick-up at a later timeSource: Progressive Grocer, 01 Feb 00; Grocery Headquarters, 01 Feb 00.