1. Nonstore Retailing & Electronic Channels
Chapter 14 with Duane Weaver

2. Outline Nonstore retailing Electronic Channels Catalog
Direct-Selling Org’s (DSO’s)
Electronic Channels
Market Opp’s
Service Output Provision and Demand-Side Gaps
Channel Flow Performance and Supply-Side Gaps
Coordination Challenges

3. Non-Store Retailing: Catalogs
E.g.: Sears Catalog, Land’s End…
Service Outputs Offered:
Break bulk
Assortment and variety can vary widely (trend towards specialty in-depth focused narrower range products)
Smaller Catalogs – more targeted mailings
Ultimate in Spatial Convenience (shop from home, yet perhaps a delay without expense of overnight delivery)

4. Non-Store Retailing: Catalogs
Segments served:
Time starved working mother
Busy Single parents
People whose time and travel costs to get to a store are expensive
The Housebound
Others?
Related Costs and Risks:
Reliance on manufacturers if do not produce yourself
Creation of the catalog (size, product coverage, segment distribution…)
Mailing List – look at lifetime value of mailing list and delete or add customers
Order Fulfillment – Logistics of picking and packing
Stock-Outs – inventory management vs. delivery delays
Merchandise returns – 6-15% in stores, 35% in catalog sales. Returns are more expensive to manage (bulk broken) and ship

5. Direct-Selling Org’s (DSO’s)
Direct Selling is “the sale of a consumer product or service in a face to face manner away from a fixed retail location”.
Typically high reliance on personal selling
E.G.’s: Amway, Mary Kay, Herbal Life, Avon, and Tupperware.
Top 5 DSO countries - sales (Canada is 10th):
Japan
USA
Brazil
Germany
Korea

6. Direct-Selling Org’s (DSO’s) MLM- Multi-level Marketing (MLDSO)
MLDSO distributors are compensated in three different ways:
Mark-up on wholesale cost earnings
MLDSO commission paid per sale
MLDSO commission on sales made by subordinates (recruits)
Balance growth of Network vs. Sale of products (often based on personal consumption)
Ilegal Pyramid Schemes:
Fraudulent mechanisms by which new recruits are required to pay a nonrefundable fee for becoming a distributor and the distributor’s only reward is this fee (there is no sale and/or consumption of a product or service). Ultimately the last layer of the pyramid will make no money from anyone (population maximized), yet the highest in the pyramid earns money from everyone.

7. Electronic Channels
…any channel that involves using the Internet as a means of reaching the end-user or any channel for which the consumer literally buys on-line. B2C or B2B.

8. Market Potential for E-Channels
Restrictive Market – must be able to shop online.
Strong Growth in some countries – % of US online, whereas in % of US online

9. Service Outputs and Demand-Side Gaps in E-Channels
Positives:
Any time of day or night spatial convenience
More pleasant shopping experience, takes less time
Price-value promotions for online shopping
Lower prices
Broader access
Consumer Control

10. Service Outputs and Demand-Side Gaps in E-Channels
Negatives:
Product return challenges
Stock availability
Timely delivery (like catalog sales)
Trust and Privacy
Prefer face-to-face shopping

11. E-Channel Flow Performance and Supply-Side Gaps
New Fixed Costs Created
Technical Infrastructure
Warehousing or inventory arrangements
Need for new intermediaries (E-bay, yahoo)
May reduce costs (EDI integration, VMI, and CRP systems)
Physical Possession – inventory, pick, pack, ship costs increase. 3rd Party expert business is on the rise as a result (FedEx).
Promotion – impacts on alternative channels such as retail stores
Negotiation – may decrease or increase in intensity
Risking – increased fear about disclosure of financial information online, reduce risk of holding inventory (ship direct from manufacturer)
Ordering – Technology has improved effectiveness of ordering dramatically (reducing operating cost and increasing entry cost)
Payment – existence of electronic payment from backing has facilitated e-commerce growth. Trust issues have induced new 3rd party members like PayPal.

12. E-Channel Coordination Challenges
Creates Dual Channel Conflicts related to Goals, Domain and perception-of-reality.
Bricks and Mortar in combination with online resellers may exert greater strength in the channel, increasing power conflicts.
Confusion about online threat results in restrictive channel behaviour precluding channel success (e.g.: mall merchants restricted from online expansion by mall leasor)

13. Thank You!