Multichannel Retailing Chapter 3

Nonstore Retail Channels Internet Retailing Channels- Electronic and Mobile Retailing Catalog Channel Direct-Response TV Channel Television Home Shopping Channel Direct Selling Channel •Retail channel- is the way a retailer sells and delivers merchandise and services to its customers •Makes a distinction between channel and medium: Channel involves the opportunity to complete a transaction. A medium is primarily used to communicate information to consumers. •Multichannel retailing- involves using more than one channel to sell and deliver merchandise and services to consumers •Began back in 1925 when Sears first opened and began selling through it’s store as well as catalogs. •Omniretailing- another way of defining multichannel retailing through seamless customer service experiences.

Store- 89.9% of Total sales Internet- 4.7% of Total sales Catalog- 3.1% of Total sales Direct Selling- 0.9% of Total sales TV home shopping- 0.5 of Total sales Automatic- 0.9% of Total sales

Internet Retailing Channels- Electronic and Mobile Retailing •Internet retailing- is the fastest growing channel. Involves retailers interacting with consumers via the internet. Done through traditional computer/ laptop or through a variety of smartphone sizes. Currently makes up 11% of all retailing. •Mobile retailing- mobile/ m-commerce: involves accessing the Internet using a smartphone. •Internet is effective since almost 75% of U.S. consumers use the Internet to search for information about clothes, shoes, toys, and health and beauty aids. Mobile accounting accounts for 9% of internet retail sales as of 2015.

Catalog Channel •Catalog channel- is a non-store retail channel in which the retail offering is communicated to customers through a catalog mailed to customers •About half of U.S. customers shop through catalogs. •Greatest catalog sales are- drugs, beauty aids, computers, software, clothing, accessories, furniture, and housewares. •Cataloging accounts for roughly 3% of 80 million tons of paper products used annually.

Direct-Response TV Channel • Direct-response TV channel- is a retail channel in which customers watch a TV advertisement that demonstrates merchandise and then place orders from that merchandise. This is done either by telephone or by using the Internet. • There are two different types of DRTV advertisements: • Long form which is known as an infomercial which is typically 30-60 minutes long. • The other is a short-form which is about 1-2 minutes long. •DRTV commercials take about a day before viewing statistics can be analyzed.

Television Home Shopping Channel •Television home shopping- retail channel in which customers watch a TV network with programs that demonstrate merchandise and then place orders for that merchandise, usually by telephone or via the Internet. Annual U.S. Sales through TV shopping networks are approximately $20 billion. •The two largest retailers using this channel are HSN and QVC, followed by ShopNBC and Jewelry Television. •This channel is being enhanced by tweeting and multiple ways of accessing the internet.

Direct Selling Channel •Direct selling- retail channel in which salespeople interact with customers face-to-face in a convenient location, either at the customer’s home or at work. •Direct salespeople demonstrate merchandise benefits and/ or explain a service, take an order, and deliver the merchandise. •Annual U.S. sales through direct selling are about $30 billion; worldwide sales are more than $100 billion. •More than 60% of the products sold through the direct selling channel are home/family care/home durables (cleaning products, cookware, cutlery, etc.) wellness (weight loss products, vitamins, etc.) and personal care cosmetics, jewelry, sin care, etc.) •This channel is most effective in less developed countries like Brazil •Two special types of direct selling are the party plan and multi-level systems. Party plan system- (about one-quarter of all direct sales) salespeople encourage customers to act as hosts and invite friends or coworkers to a “party.” The hosts or hostess receives a gift or commission for arranging the party. At the party, the merchandise is demonstrated and attendees place orders. •Multilevel system- independent businesspeople serve as master distributors, recruiting other people to become distributors in their network. Master distributors either buy merchandise from the firm and resell it to their distributors or receive a commission on all merchandise purchased by the distributors in their network. •Pyramid scheme- develops when the firm and its program are designed to sell merchandise and services to other distributors, rather than to end-users. Profit comes from distributors rather than customers.

Automated Retailing (Vending Machines) • Automated retailing/ vending machines- is a retail channel in which merchandise or services are stored in a machine and dispensed to customers when they deposit cash or use a credit card. • Vending machines are typically placed in a convenient, high-traffic locations. • About 80% of the automated retailing channel sales are from cold beverages, prepared food service, candy, and snacks. • Annual U.S. sales in the channel are about $40 billion. • Another form of this channel is DVD rentals. Redbox, blockbuster, etc…

Relative Benefits of Retail Channels Store Channel Catalog Channel Internet Channel

Store Channel Touching and Feeling Products Personal Service Risk Reduction Immediate Gratification Entertainment and Social Experience Browsing Cash Payment • Touching and Feeling Products- All 5 senses can be used when observing the product • Personal Service- Unique 1 and 1 Face-to-face customer service • Risk Reduction- lowers chance of defective and unsuitable merchandise • Immediate Gratification- Immediate use after purchase allows for immediate satisfaction • Entertainment and Social Experience- some people enjoy the break from life. Shopping allows for people to relax and socialize with others. • Browsing- Allows for a broad selections when customers only have a general sense of what they’re looking for • Cash Payment- More secure cash payments. Eliminates stress over potential excessive debt.

Catalog Channel Safety Convenience Easy to use •Safety- safety to shop in your house or wherever you choose to “shop” •Convenience- you can choose to shop wherever you feel comfortable •Easy to use- an added index makes it easier to navigate through the catalog. More direct rather than random navigating

Internet Channel Greater selection of products Retailers can provide more information Enable retailers to provide more personalized information about products and services to customers Offers sellers the unique opportunity to collect information about consumer shopping Provide opportunity for retailers to enter new markets economically Provide information they can use to improve the shopping experience across all channels

Internet Cont. Deeper and Broader Selection More Information for Evaluation Merchandise Personalization Expanded Marketing Presence Improved shopping experience through gathered information across channels Perceived Risks in Internet Shopping •Safety- safety to shop in your house or wherever you choose to “shop” •Convenience- you can choose to shop wherever you feel comfortable •Personalization= Live chats- customers can like a button at any time hand have a n instant messaging e-mail or voice conversation with a customer service representative.

Comparison of Electronic and Mobile Phone Internet Channels Phone Advantages More accessible Customer retailer mobile interactions are location-sensitive Phone Disadvantages Smaller screen to view content More screens and pages to navigate through Apps •Apps- are software application designed to improve the consumers’ shopping experiences when using smartphones and tablets. •These are typically to easily perform some specific functions available on the website.

Challenges Facing Multichannel Retailers Multichannel Supply Chains and Information Systems Centralized versus Decentralized Multichannel Retailing Consistent Brand Image across Channels Merchandise Assortment Pricing Reduction of Channel Migration • Channel migration- customer gather information from one channel then buy from another channel hosted by a competitor • A common factor of channel migration is: Showrooming- a customer goes into a store to learn about different brands and products and then searches then Internet from the same product sold at a lower price. 3 ways retailers reduce showrooming: 1. providing better customer service 2. offering uniquely relevant information based on proprietary data the retailer has collected about the customers 3. Promoting private-label merchandise that can be purchased only from the retailer

Key Terms Apps Automated retailing Catalog channel Channel migration Direct-response TV (DRTV) channel Direct selling Infomercial Internet retailing Live chat M-commerce Mobile retailing Multichannel retailing Multilevel system Omniretailing Party plan system Pyramid scheme Retail channel Showrooming Television home shopping Vending machines