Non-traditional Retailing Chapter 6 Non-traditional Retailing RETAIL MANAGEMENT: A STRATEGIC APPROACH,

Nontraditional Retailing Non-store: Direct Marketing: Internet Catalogue – examples? TV (shopping networks, infomercials) Direct Selling (phone, in-person) Other (blurred store/non-store distinctions): Video Kiosks Vending Machines Airport Retailing Non-store exceeds $10 billion annually (less than 5%) Web-based retailing is fastest growing area E-commerce sales of $2.4 billion in 2002, expected to exceed $12.2 billion in 2008 Direct Marketing Customer is first exposed to a good or service through a nonpersonal medium and then orders by mail, phone, fax, or computer Canadian consumer spends $170 per year by mail or phone and this figure is on the rise. How many receive catalogues? Which kinds Sears (Wish Book, seasonal, sale) Canadian Tire (annual) Victoria Secret Eddie Bauer Hammacher Schlammer Nontraditional retailing also includes formats that do not fit into the store and non-store based categories

Emerging Trends Changing customer lifestyles Increasing competition Mounting interest in global direct marketing Technological advances Greater use of multi-channel retailing… Perhaps even “channel obliteration”? For bricks-and-mortar stores? For catalogues?

Multi-channel Retailing Uses more than one channel Studies have shown multi-channel shoppers spend more (Sears, Canada Post) and are more loyal (Berman and Thelen 2004) Channels synergistic (JC Williams) Increased customer base, increased revenue, increased market share (Berman and Thelen 2004) 26% online Canadians make their online purchases from the same stores they shop offline (AC Nielsen 2010) Different consumer benefits are derived from each channel Successful multi-channel strategies are integrated Achieve integration: Protect (initiated for competitive parity) Evolve (become more customer centric) Transform (customer preferences integrated throughout value chain) Internet $1 Retail $3 Catalogue $ 5 $ 3 $ 7 Name some multi-channel retailers. Do you shop all channels? What benefits do you get from each channel?

From anywhere… to anyone Efficiency/Convenience Instant gratification It’s really all about maximizing the buying experience Consumers look for different experiences in the different channels In-depth information Resource Personalized Dynamic Efficiency/Convenience Accessible Tactile interaction Instant gratification Human interaction Service Destination Entertainment Information Longevity Tangibility Portability Retail Experience Catalogue Experience Online Experience Source: J.C. Williams Group

Airport Retailing Vancouver International Airport Hong Kong International Airport “Airport Authority with the Most Supportive Approach to Travel-Retail” at the DFNI Asian Awards for Travel-Retail Excellence Airport retailing is becoming increasingly significant Reduced in-air services Increased waiting times Captive audience Impulse purchase behaviour Reduced price sensitivity Extended hours Potential difficulties include: Higher rent Receipt of inventory (inconvenient) Inventory storage Airport retail characterized by higher sales per square foot

Vending Machines Formerly dominated by tobacco Dominated by food in Canada 94% of $720 million in revenue April Glavine, Saint Mary’s MBA What items would you consider purchasing from a vending machine? New Trends: Hot food Durables (clothing, souvenirs) iPods??

Web Retailing Have you made a purchase online? 76% Canada’s internet users have shopped online Compared with 98% in South Korea and 97% in Japan, Germany and Great Britain The stat is at 94% for the US What have you purchased and why? Most frequent online purchases in Canada (Dec 2009) Books DVDs Clothing/shoes Electronics Airline tickets Resources: Stats Can data; AC Nielsen Report

Reasons Customers Buy Online Convenience Control Choice Communication Customization (My Publisher, American Eagle, Future Shop, youbobble.ca) Cost* Convenience – in pjs, at 3am, at lunch, @ office, whenever they feel like it Control - no pushy sales person; no impulse buys? Choice – purchase from anywhere – across country or across globe Communication – no waiting on hold, email and respond (convenience) Customization – get exactly what they want (perceived personalization); customized content Cost* - many believe they should see cost savings (free shipping issues), this expectation may be changing slightly

Reasons Retailers Use Web Competitive necessity Generate sales Enhance image Reach geographically-dispersed customers Provide information to customers Promotion - new products, special offers Provide customer service (e.g., e-mail, shopping assistants) Obtain customer feedback Employee recruitment Present information to potential investors, franchisees, and the media

Figure 6.8 Five Stages of Developing Retail Web Presence 1. Brochure Web Site 2. Commerce Web Site 3. Integrated Web Site 4. The ‘Webified’ Store Brochure site – sobeys.com; harry rosen Commerce site – KontactSports; Toys R Us Integrated – lego.com; old navy; Webified store – chapters indigo Integrated with manufacturer systems 5. Site Integrated with Manufacturer Systems

Connected, but not buying… Canada most connected country in the world Canadians were the world leader in broadband adoptions But, online Canadians aren’t avid online purchasers relative to other countries 40% of Canadian Internet users abandoned at least one virtual shopping cart on a Canadian site. WHY? Overall, only 5% of visitors to retail Web sites are actually buying. http://www.cbc.ca/consumer/story/2008/11/17/online-shopping.html http://www.acnielsen.ca/site/documents/OnlineShopping.pdf

Reasons NOT Shopping Online Browsing Shipping costs too high Privacy Inconvenience (had to register) Poor site design Fulfillment issues?? (eg. Red Envelope)

BlueNile.com

BlueNile.com Questions Discuss the consumer behaviour of a traditional diamond engagement ring purchase. How does it compare to a BlueNile.com purchase? Is channel obliteration – the destruction of traditional distribution channels – likely in jewelry retail? Why or why not? What have been BlueNile’s KSFs to date? Consumer behaviour Looking for different things Channel Obliteration possible? It is possible and some retailers are worried, but if it occurs, it won’t be entirely as a result of online jewellers like BlueNile. Here are two paragraphs cut from the 2007 article: Blue Nile and other Internet jewelers are not solely responsible for smaller profits at traditional jewelers nor for the loss of more than 3,000 independent jewelry shops since 1999. Main Street jewelers, after all, have faced tough competition for decades, from the Home Shopping Network and other television creations beginning in the 1980s to, more recently, Wal-Mart, Costco and other big-box retailers that are grabbing a large share of the low-end jewelry market. A spike in the price of gold and other precious metals has also eaten into jewelry store profits.   Tiffany’s declined to make a spokesman available for this article, but in a prepared statement said its diamond sales continue to grow, despite Blue Nile, confirming “the strong appeal of Tiffany’s diamond jewelry and the Tiffany & Company shopping experience.” BlueNile KSFs From article: Cost structure (overhead 13% rev v small retailer's @ 30-40% Buying power Education – that was the criteria which got Vadon’s notice Management Cash injections at critical times W-o-m From other sources: Site aesthetics! Redesigned site in 2009 after realizing it was frequently women browsing the site and encouraging purchase Tonnes of info (consistent with educational philosophy) but also supported by its Good layout Searchability Graphics Large pics and zoomable too! Where does BlueNile go from here? Right-hand rings Other types of jewellery Ethnic pieces (given presence in 40 countries) Cultural pieces

The Value of Multi-Channel Using the Internet is most successful when it is part of an integrated multi-channel strategy. Clicks-and-mortar retailers address the consumer's emerging preference to enjoy the same shopping experience and convenience in all channels (e.g., store, catalogue, Internet). Internet retailing may not result in channel obliteration as once expected, but many retailers are planning substantial growth from this area. http://www.businessweek.com/news/2010-10-26/u-k-retailers-boosting-online-offering-deloitte-s-geddes-says.html Two challenges are: converting browsers to shoppers regardless of the channel they choose. repatriating the 45% of Canadian online shoppers who are buying from foreign sites. Retail Interactive (http://retailinteractive.ca/SSG/ri00913e.html)