1. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Internet Marketing & e-Commerce Ward Hanson Kirthi Kalyanam Requests for permission to copy any part of the material should be addressed to: PERMISSIONS DEPARTMENT THOMSON BUSINESS and ECONOMICS 5109 Natorp Boulevard Mason, OH 45040 Phone: (800) 423-0563

2. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Part Three: Chapter 13 Internet Retailing “A salesman is got to dream, boy. It comes with the territory.” Arthur Miller, Death of a Salesman

3. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Growth of Online Retail Quarterly measurement of e-commerce added to U.S. retail activity in 1999 Grew from $5 billion in Q4 1999 to $23 billion in Q4 2005 Annual online retail exceeded $84 billion in 2005 Still, just 2.4 percent of all retail sales

4. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Growth of Online Retail DATA SOURCE: www.census.gov

5. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Growth of Online Retail Online retail percentages vary greatly across product categories Key areas for retail sales: –Computer hardware and software –Tickets –Books Top categories involve digital products or information-rich purchases

6. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Growth of Online Retail Consumer e-commerce penetration by product category SOURCE: The State of Retail Online, 6.0, a Shop.org Survey conducted by Forrester Research

7. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Growth of Online Retail For Internet retailers, better performance has meant better results –Benefits of higher inventory productivity –Swift response to changes in customer demands and product transformations –Customer satisfaction generally higher

8. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Growth of Online Retail American customer satisfaction index scores Data Source: American Customer Satisfaction Index, www.theacsi.org

9. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation iPACE and Online Shopping Understanding basic consumer needs to find right approach for right channel: –Information –Price –Assortment –Convenience –Entertainment

10. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation iPACE and Online Shopping Information: Quality and features of a product, from initial consideration set through final purchase, shipping and returns

11. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation iPACE and Online Shopping Price: Draw of lower prices and ease of comparison, but consumers also engage in price partitioning – evaluating influence of taxes and shipping costs on bottom line

12. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation iPACE and Online Shopping Assortment: Greater variety and availability online, products are easier to configure and prices easier to adjust

13. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation iPACE and Online Shopping Convenience: Avoiding the hassle of traditional stores, easing repeat purchases

14. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation iPACE and Online Shopping Entertainment: The online thrills of eBay vs. the lost social aspect of shopping excursions with friends

15. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Online Shopping Process The consumer shopping cycle

16. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Online Shopping Process The consumer shopping cycle on a web site

17. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Online Shopping Process Step One: Finding the right product –Influence of search and browsing to find right product in rapidly expanding Web marketplace –Helping shoppers narrow selection

18. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Online Shopping Process Step Two: Acquiring information –Overcoming the physical limitations of online shopping –Product descriptions through images, zoom, ratings and reviews –Personalized information through virtual models and diagrams –Cross selling and solution selling opportunities

19. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Online Shopping Process Virtual model™ on Lands’ End.com

20. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Online Shopping Process Step Three: Evaluating alternatives –Two versions of the choice model Compensatory choice model compares products and services on all attributes Non-compensatory choice model compares products based on certain attributes, eliminates products without those key features –Shopping tools – such as a comparison matrix or assistant – reduce consumer effort; tools that screen products have strongest impact on consumer accuracy

21. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Online Shopping Process Step Four: Placing the order –Many Internet shoppers fail to complete attempted purchases Poor information design, lack of transparency on ship costs –Efficient reordering and repeat purchase systems help track customers and hold marketing campaigns accountable

22. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Online Shopping Process Step Five: Following up –Post-purchase notifications such as order confirmation, total price, shipping date and expected delivery date –Returns made simpler with prepaid return labels, merchandise pickup

23. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Multi-Channel Retailing Understanding the hybrid customer (the shopping “centaur”) who is willing to shop online but buy at a traditional store, and visa versa –Customers who shop regularly in traditional stores are least likely to use multiple channels –Online and catalog shoppers more likely to use other channels for some purchases

24. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Multi-Channel Retailing Shopper Classification Percent Purchasing in Channel OnlineStoreCatalog Online100%78%45% Store6%100%22% Catalog23%36%100% Customers from one channel who purchased in another SOURCE: The State of Retail Online, 5.0, Shop.org

25. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Multi-Channel Retailing Shopper Classification % Reporting a Purchase Influenced By OnlineStoreCatalog Online100%25%68% Store22%100%26% Catalog39%26%100% Buyers who purchased something in one channel previously seen in another channel SOURCE: Company reports as compiled by Forward Retailing, Inc.

26. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Multi-Channel Retailing Shopper groups indicating preference for research and buying SOURCE: The State of Retail Online, 5.0, Shop.org

27. © Copyright 2006, Thomson South-Western, a division of the Thomson Corporation Multi-Channel Retailing Challenges for retailers working across online and traditional channels –Determining what products are sold in the store, online or through catalogs –Communications and logistics –Pricing discrepancies –Planning consistent promotional offerings –Rewarding the right seller: Does the credit go online or off?