Multi-Channel Retailing

The Multi-Channel Retailer

Today’s empowered consumers live in a multi-channel world -- Research products online, buy offline, and demand service everywhere Web & Email • 24x7 • Visual Consumers buy what they want, when they want, wherever they want Call Center • Convenient • Immediate Brick & Mortar • Touch/Feel • Experience driven First, 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 • Convenient Customer Pervasive • Immediate • 24x7

Why are Retailers Using Multiple Channels to Interact with Customers? Customer Want to interact in different ways Each channel offers a unique set of benefits for Customers

Unique Benefits Provided by Store Channel Browsing Touch and feel products Personal service Cash payment Immediate gratification Entertainment and social interaction

Benefits Provided by Catalog Channel Convenience Portability, easily accessible Visual presentation Safety

Unique Benefits Provided by Internet Channel Convenience Safety Broad selection Detailed information Personalization Problem-solving information

Electronically from Home Will Consumers Shop Electronically from Home or Go to the Mall?

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 Retailing Just a Drop in the Bucket, But Growing Fast!

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

Positive Outlook for Future Younger people are growing up with computers view them as an appliance 55% of U.S. households have Internet access now and more have access at work Women use the Internet almost as much as men now 40% of people buying cars go to the Internet for info before seeing a dealer

Impediments to Shopping On-Line Technological concerns are becoming less important Access to Internet Bandwidth Privacy, Security concerns Are the benefits of shopping on-line greater than the benefits of going to a store?

Factors Affecting the Diffusion of an Innovation Ease with which the innovation can be tried out On-line access Perceived risks of adoption Security, Privacy Perceived benefits compared to present alternatives (going to store or buying from catalogs)

Internet Users Across the Globe

Why Do People Patronize a Retailer? Merchandise Assortments Service Convenience Information to make good selections Price - Total cost to customer Go to store, find right merchandise, return merchandise Entertainment Social interaction

Benefits of Electronic Channel Increased Assortment More Information to Evaluate Merchandise Drill Down as Much as You Want Full motion Video Personalization Fred, the Super Sales Associate Try It On Virtually Information for Solving Problems, Not Just Merchandise Characteristics Virtual Communities

Using an Agent to Locate Merchandise

Virtual Communities Definition: Virtual community is a network of members sharing common interests that interact with each other electronically.

Virtual Communities Virtual community is a network of members sharing common interests that interact with each other electronically. Examples: IVillage - Women Garden.Com - Gardeners Ibelieve.com

The Knot -- Solving Your Wedding Problems

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 resources Generation and dissemination of member generated information -- increases quality, breadth and depth of information.

Value Proposition for Members Fantasy and Entertainment Meaningful personal relationships -- Opportunity to interaction with other people with common interests draws people to community. Access to competing vendors and publishers

Value Proposition for Commercial Organizer Reduce cost of locating and targeting customers Reduce cost of motivating customers to make purchase decisions Opportunity for tailoring products, services, Lower capital investment – don’t have to build store fronts. Broader geographic reach

Benefits for Community Manager Strengthen Brand Name, Reputation Build Customer Relationships Extend Database of Potential Customers Revenue Generation Sell Merchandise Sell Services to Members Membership fees (Annual Charge for Access) Usage fee (Downloads, Time of Access) Advertising (Charge Advertisers)

Sources of Revenue Subscription fees – fixed monthly charge Usage fee – charge based on usage Membership fees Content delivery fees – charge to download information Service fee – notification fee Advertising Transaction commissions Sales of membership list or access to members

Who Is Best Suited to Organize a Virtual Community? Concerned Consumers Content Providers - Vertical Publications Suppliers Retailers Offering Competing Products Unbiased, Good Reputation Know How to Run a Business Selling to Consumers -- Primary Revenue Source

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 purchase Gifts Services Might not need to “Touch and Feel” “Touch and Feel” not useful - Gifts Superior presentation of “Touch and Feel” Branding

Why Did So Many e-tailers Fail?

Store-based Retailers vs. Electronic Retail Entrepreneurs Knowledge of Retailing Assortment Planning Distribution Systems Reputation Customer Database Convenient Location for Picking Up, Returning Merchandise, Warranty Service and Installation Vendor Relationships

Widespread Disintermediation Unlikely Advantages of Retailers vs. Manufacturers Distribute Merchandise Directly to Customers Provide Assortments Collect and Use Information about Customers Widespread Disintermediation Unlikely

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

Issues Confronting a Multi-Channel Retailer Maintaining Brand Image Across Channels Merchandise Assortment Offered in Each Channel Pricing Across Channels

Customers Want to Recognized No Matter What Channel they Use Internet Call Center Customer Relationship Customers Brick & Mortar Pervasive Kiosk

Integration – Key to Multi-Channel Retailing Create a Seamless Experience Make it Easy Provide Support Know thy Customer • Ordering Returns Refunds Call Center Shopping Advice Service Needs and preferences One to One Marketing Synchronized & consistent service regardless of channel

Illustration of Multi-Channel 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.