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Multichannel Retailing Lynda Gamans Poloian. Chapter 2 Components of Multichannel Retailing.

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Presentation on theme: "Multichannel Retailing Lynda Gamans Poloian. Chapter 2 Components of Multichannel Retailing."— Presentation transcript:

1 Multichannel Retailing Lynda Gamans Poloian

2 Chapter 2 Components of Multichannel Retailing

3 L. Poloian Chapter 2 ©2009 Fairchild Books, A Division of Condé Nast Publications. Key Components Brick-and-mortar Direct marketing Mail and catalog Direct selling-HSN Online stores Other electronic retailing methods-S, I, M Commerce

4 L. Poloian Chapter 2 ©2009 Fairchild Books, A Division of Condé Nast Publications. Brick-and-Mortar Retailers Department stores, specialty stores, and discounters Brick-and-mortar channel accounts for about 40 percent of all multichannel sales Strengths, weaknesses?

5 L. Poloian Chapter 2 ©2009 Fairchild Books, A Division of Condé Nast Publications. Department Stores Full-line department stores like Macy’s and Kohl’s carry both hard and soft goods Limited-line department stores like Saks Fifth Avenue and Neiman Marcus concentrate on soft goods What are the benefits of freestanding versus anchor’s in a mall?

6 L. Poloian Chapter 2 ©2009 Fairchild Books, A Division of Condé Nast Publications. Department Stores: Target Market and Pricing Strategies Department stores use lifestyle factors, brand preferences, income and ethnicity to describe their target markets Some limited-line stores like Nordstrom typically have sophisticated consumer Department stores like J.C. Penney use moderate prices and target middle-income shoppers Given these examples do we see any deviations in merchandise polarity?

7 L. Poloian Chapter 2 ©2009 Fairchild Books, A Division of Condé Nast Publications. Department Store Challenges Increased competition Unexciting merchandise Loss of focus Too much square footage Dependence on promotions Inconsistent customer service Industry consolidation

8 L. Poloian Chapter 2 ©2009 Fairchild Books, A Division of Condé Nast Publications. Department Store Solutions Partnerships with well- branded lines Store-within-a-store concepts Private-label merchandise Targeting underserved markets Adding customer services Opening online stores What are some ideas that can bring us new business via multi channel?

9 L. Poloian Chapter 2 ©2009 Fairchild Books, A Division of Condé Nast Publications. Specialty Stores Highly focused On top of trends Range from sole proprietorships to global chain stores Cover wide range of products, services, and prices How can they effectively increase sales volume with multichannel?

10 L. Poloian Chapter 2 ©2009 Fairchild Books, A Division of Condé Nast Publications. Specialty Stores: Target Market and Pricing Strategies Segment markets by age, interest, gender, income level, ethnicity, lifestyle and/or fashion orientation Most chains have online stores and many are international retailers Range from high-priced collections to less expensive lines

11 L. Poloian Chapter 2 ©2009 Fairchild Books, A Division of Condé Nast Publications. Specialty Store Strengths Easier to merchandise stores High brand visibility Faster turnover than department stores Apparel stores that also sell online benefit from growth trend in Internet apparel sales

12 L. Poloian Chapter 2 ©2009 Fairchild Books, A Division of Condé Nast Publications. Specialty Store Weaknesses High visibility contributes to decreasing exclusivity Having trend-right merchandise every fashion season is difficult Changes in target market structure or customer preferences may go unnoticed

13 L. Poloian Chapter 2 ©2009 Fairchild Books, A Division of Condé Nast Publications. Specialty Store Solutions Spin-offs may help capture new markets –American Eagle Outfitters opened Martin + Osa geared to a slightly older target market This tactic doesn’t always work –Gap closed its Forth & Town spin-off less than two years after launch

14 L. Poloian Chapter 2 ©2009 Fairchild Books, A Division of Condé Nast Publications. Discount Stores Discount stores have grown steadily and evolved since their inception in the 1980s Low prices, broad assortments in no-frills big-box stores High turnover of merchandise and gross margins are lower than department or specialty stores

15 L. Poloian Chapter 2 ©2009 Fairchild Books, A Division of Condé Nast Publications. Types of Discount Retailers: General Merchandise Discounters General merchandise retailers include discount department stores like Walmart and Kmart Upmarket discounters like Target reach fashion-conscious customers How can they benefit from multi channel retailing?

16 L. Poloian Chapter 2 ©2009 Fairchild Books, A Division of Condé Nast Publications. Types of Discount Retailers: Category Killers Large specialty superstores with warehouse overtones typify category killers Category killers offer a broad assortment of goods and depth in the categories they carry The Sports Authority, Lowe’s, Toys R Us, Staples, and Best Buy are examples

17 L. Poloian Chapter 2 ©2009 Fairchild Books, A Division of Condé Nast Publications. Types of “Discount Retailers” Off-price Discounters Offer nationally branded goods at significantly lower prices than department or specialty stores Usually specialize in apparel and/or home décor and furnishings Merchandise turnover is times per year in stores like T.J. Maxx and Dress Barn

18 L. Poloian Chapter 2 ©2009 Fairchild Books, A Division of Condé Nast Publications. Types of Discount Retailers: Warehouse Clubs Bulk purchasing in large bare-bones facilities is offered to members of warehouse clubs Large array of hard and soft goods and food, available at competitive prices Costco and Sam’s Club lead the industry Is there a benefit to MCR?

19 L. Poloian Chapter 2 ©2009 Fairchild Books, A Division of Condé Nast Publications. Types of Discount Retailers: Other Formats Factory outlet stores: company owned stores that sell manufacturers overruns, seconds, irregular and/or sample merchandise Deep discounters: retailers that target lower income families and offer broad assortments of ever-changing merchandise

20 L. Poloian Chapter 2 ©2009 Fairchild Books, A Division of Condé Nast Publications. Strengths of Brick-and-Mortar Retailers: Common Characteristics Strong physical presence lends excitement to the shopping experience Visual merchandising tempts customers One-on-one customer service Cross-channel options expand reach Strong brand presence

21 L. Poloian Chapter 2 ©2009 Fairchild Books, A Division of Condé Nast Publications. Direct Marketing and Selling Methods Direct Marketing –Uses various and flexible advertising media to generate sales or leads –Based on relationship building activities –Database centered –Technology driven Direct Selling –Personal form of selling; involves one- on-one communication –Sales occur in home, office, or online –Demonstrations, parties, and consultative selling techniques used

22 L. Poloian Chapter 2 ©2009 Fairchild Books, A Division of Condé Nast Publications. Direct Marketing Terminology Has distinctive vocabulary that extends to multichannel retailing Focus on prospecting for customers, constructing and using databases derived from customer purchasing behavior Recency, frequency, and monetary value (RFM) of purchases are chief metrics captured

23 L. Poloian Chapter 2 ©2009 Fairchild Books, A Division of Condé Nast Publications. Direct Mailing Terminology Predictive modeling is done, mailing lists are compiled, and the lifetime value of customers is of great worth to direct marketers The total company effort to satisfy the needs of customers is called customer relationship management (CRM)

24 L. Poloian Chapter 2 ©2009 Fairchild Books, A Division of Condé Nast Publications. Direct Marketing Components: Catalog Selling Versus Store Retailing Catalog Selling –Mood created through color, layout, photography, and paper quality –Catalogs have longer life –Catalogs reach customers at home –Accessible 24/7 Store Retailing –Mood evoked by store layout and design, lighting, ambience –Store advertisements are short lived –Stores depend on foot traffic and advertising –Accessible only during hours open

25 L. Poloian Chapter 2 ©2009 Fairchild Books, A Division of Condé Nast Publications. Catalog Selling: Drawbacks and Solutions Drawbacks –Fit, touch, and quality assessment issues –Increasing paper and mailing costs –Intrusiveness of customer contact methods –Redundancy of merchandising Solutions –Provide liberal return policies, color swatches, online support –Provide catalog online –Encourage opt-in programs –Innovative merchandising tactics

26 L. Poloian Chapter 2 ©2009 Fairchild Books, A Division of Condé Nast Publications. Advantages of Direct Mail Effective when targeting specific market segments Creative and effective print solutions possible Prospect for new customers, follow up on telemarketing, and drive customers to Web sites

27 L. Poloian Chapter 2 ©2009 Fairchild Books, A Division of Condé Nast Publications. Challenges to Direct Mail High mobility of the population makes reaching customers difficult Large quantities of mail may cause direct mail offer to go unnoticed Rising paper, printing and postal costs

28 L. Poloian Chapter 2 ©2009 Fairchild Books, A Division of Condé Nast Publications. Advantages of Telemarketing Person-to-person contact Immediately responsive Incremental method Cost accountability Careful targeting In-bound and out- bound capabilities

29 L. Poloian Chapter 2 ©2009 Fairchild Books, A Division of Condé Nast Publications. Disadvantages of Telemarketing High hang-up rates Difficulty reaching customers Invasion of privacy Security concerns

30 L. Poloian Chapter 2 ©2009 Fairchild Books, A Division of Condé Nast Publications. Direct Selling Methods: Two Types of Situations Face-to-face –Takes place in home or workplace –Comprises 75 percent of direct selling –Selling is done one-on- one or through parties or other groups Remote –Takes place online or via the telephone –Accounts for 25 percent of direct sales –Online direct sellers engage in personal services equivalent to face-to-face contact

31 L. Poloian Chapter 2 ©2009 Fairchild Books, A Division of Condé Nast Publications. Electronic Retailing Scope includes television home shopping in broadcast and interactive forms as well as infomercials Electronic kiosks enhance the reach and merchandise assortment of retailers Online stores provide cross-channel shopping

32 L. Poloian Chapter 2 ©2009 Fairchild Books, A Division of Condé Nast Publications. Online Strategies: Reaching the Customer High performing online retailers use many tactics to attract customers and satisfy their needs and wants Push strategies: when retailers initiate the selling process Pull strategies: when customers initiate the selling process

33 Online Strategies: Reaching the Customer Merchandise preferences changing as online selling matures Mass merchants and department stores drive the most volume online Apparel and accessories retailers outpaced all other merchandise categories and represented 21 percent of all retailers in the top 500 list in 2007

34 L. Poloian Chapter 2 ©2009 Fairchild Books, A Division of Condé Nast Publications. Online Strategies: Reaching the Customer Shopping Options: Online shopping malls run the gamut from general merchandise venues to niche market sites Online auction sites empower individuals to initiate trade Comparison shopping sites encourage customers to seek the best value

35 L. Poloian Chapter 2 ©2009 Fairchild Books, A Division of Condé Nast Publications. Tactics and Concerns of Online Retailers Online Tactics –Optimizing search engine efficiency –Increasing conversion rates –Reducing shopping cart abandonment –Increasing frequency of purchase Online Concerns –Customer privacy; data collection and storage –Online fraud; ID theft –Sales taxation –Updating Web sites –Improving customer service

36 L. Poloian Chapter 2 ©2009 Fairchild Books, A Division of Condé Nast Publications. Electronic Retailing Options: Advantages of Mobile Commerce Flexible, portable, convenient Attractive visual and auditory medium Users receptive to text messaging M-commerce experiencing high growth rates worldwide Technology keeping pace with growth

37 L. Poloian Chapter 2 ©2009 Fairchild Books, A Division of Condé Nast Publications. Electronic Retailing Options: Disadvantages of Mobile Commerce Public annoyance factor Hang-up rates and privacy issues Presence of unscrupulous offers and spam Consumer awareness and acceptance of changing use costs Constant challenge of technological changes

38 L. Poloian Chapter 2 ©2009 Fairchild Books, A Division of Condé Nast Publications. Electronic Retailing Options: Electronic Kiosks Advantages –Need little space; many location options –Extend customer services when store closed –Encourage self-service –Expand store inventories –Useful for employee recruitment Disadvantages –Cost of implementation and maintenance –Some are not user friendly –Some customers prefer human interaction –Should not be a replacement for sales promotion and customer service

39 L. Poloian Chapter 2 ©2009 Fairchild Books, A Division of Condé Nast Publications. Television Retailing: Options and Benefits Options –Home shopping channels –Infomercials –Interactive television: you-see-it-you-buy-it options Benefits –Distinct target markets –Viewers initiate programming and transactions –Can be used in conjunction with

40 L. Poloian Chapter 2 ©2009 Fairchild Books, A Division of Condé Nast Publications. Summary The multichannel approach to retailing integrates some or all of these components Customer convenience and retail objectives determine channel and vehicle selection


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