MultiChannel Retailing By Thia Mullen and Jennifer Hill

Why are Retailers using Multiple Channels to Interact with Customers? Customers want to interact in different ways Each Channel offers different benefits for Customers The retailers can also reach more customers by using multiple channels

More reasons for becoming a Multi-Channel Retailer Increase in Share of Wallet For example: Eddie Bauer, single channel customers spend $100 -$200 per year, dual-channel customers spend $ 300-$500 per year, tri – channel customers spend $800-$1000 per year Overcome Limitations of Existing Format Provide services more cost efficiently Leverage of Existing Assets Brand Name, Inventory, Customer Database Develop Insights in Customer Shopping Behavior

Dollars spent at different channels: Average annual dollars spent by JCPenney customers

Why are Retailers using Multiple channels to Interact with Customers? Customers buy what they want, When they want, Whenever they want customer

Assignment One Create a video explaining two issues of multichannel retailing Jessica Clutter Shannon Franke Shaina Lacher Stacia Wakeley Aaron Monteith Jennifer Cooper

Store Channel Benefits Browsing Touching and Feeling Products Personal Service Cash and Credit Payment Entertainment and Social Experience Immediate Gratification Risk Reduction

Catalog Channel Benefits Convenience Safety Portability and easy access

Assignment Two Create a podcast to highlight a company that uses all three levels of multichannel retailing and explain if it makes them more successful or not. Amanda Stewart Matthew Sullivan Cassie Furcher Rechinda Bryant Matthew Walden

Assignment Three Create a screencast or digital storytelling to explain three of the capabilities needed for multichannel retailing. Tasha Dorrnick Milton Law Lindsey Danielson Rick Nunez Jessie Drury

Internet Channel Provides convenience offered by catalogs and other non- store formats Compared with store and catalog channels, has potential to offer greater selection of products More personalized information about products and services in relatively short amount of time Unique opportunity to collect information about how consumers shop

Internet Channel – Broader Selection Compared with the other two channels, vast number of alternatives available to consumers Consumers can easily “visit” and select merchandise from broader array of retailers Retail websites typically offer deeper assortments of merchandise than are available in stores Enables them to satisfy consumer demand for less popular styles, colors, or sizes and still keep overall inventory costs low

Internet Channel – More Information to Evaluate Merchandise Important service offered by retailers is provision of information to help customers make better buying decisions Depth of information at retailer’s website can provide solutions to customer problems Retailers can provide as much information as each customer wants More information than the customer could get through store or catalog

More Information to Evaluate Merchandise Information on an electronic channel database can be frequently updated and always available Customers can format information so they can effectively use it when evaluating products Virtual communities – networks of people who seek information, products, services and communicate with one another about specific issues

More Information to Evaluate Merchandise Social shoppers – people who participate in virtual communities Some social shoppers will may spend two or three times amount of time traditional shoppers do May not make a purchase Experience of shopping they enjoy more than product or service

More Information to Evaluate Merchandise Many retailers have added ability for customers to post reviews Provide valuable feedback to buyers about what is liked or not liked Retailers ideally suited to offer problem-solving sites for customers Have skills to put together merchandise assortments, services, and information

Internet Channel – Personalization Potential benefit is ability to personalize information for each customer economically Catalogs cannot tailor merchandise and information to needs and preferences to individual customers Provide “personal” service at a low cost

Personalization – Personalized Customer Service To improve customer service from an electronic channel, many retailers offer live, online chats Online chat Economically attractive for retailers Cost is less than an email and 1/3 the cost of a phone call

Personalization – Personalized Offering Retailers can personalize offerings for each customer Customers can personalize web pages Retailers can personalize promotions Can test different promotions in real time If a 5% discount works better than $5 off, stay with more successful promotion

Selling Merchandise with “Touch-and-Feel” Attributes Due to problems of providing touch-and-feel information, apparel retailers experience more return rates 20% on purchases made through an electronic channel 10% on purchases made in stores

“Touch-and-Feel” – Role of Brands Brands provide consistent experience Helps overcome difficulty of not being able to touch and feel Because consumers trust familiar brands, name brands sell successfully Not just through electronic channels, but also through internet, catalogs, and TV home shopping

“Touch-and-Feel” – Using Technology Retailers using technology to convert touch-and-feel information to look-and-see information Websites going beyond basic images and using 3D imaging and/or zoom technology The use of image-enhancing technologies has increased conversion rates and reduced returns

“Touch-and-Feel” – Using Technology To overcome limitations associated with trying on clothing, apparel retailers started using virtual models Enable consumers to see selected merchandise looks on an image with similar proportions

“Touch-and-Feel” – Gifts Some information in a store is not much better than the information provided electronically Stores offering little benefit over an electronic channel in terms of useful information provided about some merchandise Buying gifts electronically offers benefit of saving time and effort of packing and sending gifts

“Touch-and-Feel” – Services Some service retailers have been very successful over the internet Look-and-see attributes of offering can be presented very effectively online

Using the Internet to Improve Multichannel Shopping Experience An electronic channel can provide valuable insights into how and why customers shop Insights on if customers are dissatisfied or satisfied with experiences Valuable information for assortment planning would be customer willingness to substitute one brand for another Collecting data as customers navigate through a website is easy

Perceived Risks in Electronic Shopping Two critical perceived risks Security of credit card transactions on the internet Almost all retailers use sophisticated technologies to encrypt communications Potential privacy violations Consumers concerned about the ability of retailers to collect information about: Purchase history Personal information Search behavior

Evolution Toward Multichannel Retailing Four reasons traditional store-based and catalog retailers are placing more emphasis on electronic channels Electronic channel gives opportunity to overcome limitations of primary existing format Retailers can reach out to new markets Providing multichannel offering builds “share of wallet” Enables retailers to gain valuable insights into customers’ shopping behavior

Overcoming the Limitations of an Existing Format Greatest constraints facing store-based retailers is size of stores Amount of merchandise that can be displayed and offered for sale in stores is limited By blending stores with internet-enabled kiosks, retailers can expand assortment to customers

Overcoming the Limitations of an Existing Format Another limitation is store-based retailers face is inconsistent execution Knowledge and availability vary across stores and within a store at different times during the day Difficult for retailers selling new, complex merchandise

Expanding Market Presence Electronic channel is attractive to firms with strong brand names but limited locations and distribution Some retailers are widely known for offering unique, high-quality merchandise, but require customers to travel

Increasing Share of Wallet Offering an electronic channel may lead to some cannibalization If used synergistically with other channels could result in more total purchases from a retailer Traditional single-channel retailers can use one channel to promote services offered by other channels

Increasing Share of Wallet A store’s website can be advertised on: In-store signs Shopping bags Credit card billing statements Point of sale receipts Print or broadcast advertising Physical stores and catalogs also advertisements

Increasing Share of Wallet Store-based retailers can leverage stores to lower cost of fulfilling orders and processing returned merchandise Customers can be offered opportunity to pick up and return merchandise at retailer’s stores Many retailers will waive shipping fees if customer picks up merchandise in-store

Capabilities needed for Multichannel Retailing To effectively operate and realize the benefits of multichannel retailing, firms need to have the skills to: Develop assortments and manage inventory Manage People in remote locations Efficiently distribute merchandise to stores Present merchandise effectively in a printed format and distrubute catalogs Present merchandise effectively on a Web site Process orders from individual customers electronically Efficiently distribute merchandise to homes and accept returns Integrate information systems to provide a seamless customer experience across channels

Who has these Critical Resources Who has these Critical Resources? Capabilities for Multi-Channel Retailers

Resources Needed to Compete Efficiently in Internet Retailing Easy to use website Management Information System Order Processing Customer database Personalization software

Resources Needed to Compete Efficiently in Internet Retailing Retailing Skills Managing Inventory Editing assortment Efficient Fulfillment Systems Significant costs- last mile Picking and packing individual orders Handling returns – reverse distribution

Resources Needed to Compete Efficiently in Internet Retailing Strong Brand Name and Image Build traffic Reduce customer perceived risk Complementary Merchandise One stop shopping Lower shipping costs Availability of Customer Information Tailored presentations – personalized

Why did Internet Retailers Fail? Lack of Skills to Succeed in Internet Retailing Consumers Prefer Multi-Channel Retailers

Why did Internet Retailers Fail? They had skills in Web Design They had systems to manage transaction They did not have skills in brand recognition They did not have skills necessary to build consumer trust They did not have skills to build assortments, manage inventory, and fulfill small orders to homes They did not posses sufficient resources to evolve into multichannel retailers

Catalog Retailers are ready for internet retailing Ready to take orders Handling returned merchandise Able to deliver Extensive information about their customer – personalization Database already in place Visual merchandise same online as in catalog

Why are store-based retailers moving multi-channel retailers? Sales through an electronic channel are growing at over 20% per year Multi-channel retailers can attract more customers and satisfy existing customers better The growth of sales in stores is declining

Impact of Internet Shopping on Stores Sales

Which Channel is the most Profitable? Stores Electronic Retailers Bricks and Mortar, Salespeople Attracting Customers to Store Distribution Centers Restocking Returned Merchandise Building, Refreshing Web Site Attracting Customers to Web Site: “Customer-Acquisition Costs” are huge but “Customers’ switching costs” are tiny. Picking, Packing, Mailing Small Orders to Home Restocking Returned Merchandise

Will Manufacturers Bypass Retailers and Sell Directly to Consumers? Advantages Retailers have over Manufacturers Retailers sell many brands allowing the customer more variety Retailers distribute directly to the customer Retailers collect and use Information about Customers Widespread Disintermediation is unlikely.

Issues in Multichannel Retailing Integrated Shopping Experience Communicate with customers anytime, anywhere through multiple channels Intergrating legacy systems for seamless customer interface Brand Image Maintain the same image to their customer accros all channels Merchandise Assortment online and in store Pricing

Multichannel shopping

Illustration of Multichannel Integration Consumer does not find desired item in the store. Consumer goes to kiosk to search for product Kiosk links to chain’s web-site allowing consumers to find and purchase item Consumer places order online for home delivery or store pick-up at a later time Source: Progressive Grocer, 01 Feb 00; Grocery Headquarters, 01 Feb 00. 3-49

Opportunities to Enhance online shopping Order online, Pick up at store Product available in store available on website Kiosk available in store to order items not available in store Web sites features in store deals and coupons/promotions Ad Circular available on website

Shopping in the Future Great advantage to have customer database shared by all channels and integrated across all systems Sales associate and store systems able to offer superior customer service based on the database Technology also supports retailer’s business model Promises to offer customers products and services which would provide best shopping experience

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