Chapter 6

1. Chapter 6 Web, Nonstore-Based, and Other Forms of Nontraditional Retailing Dr. Pointer

2. Chapter Objectives • To contrast single-channel and multi-channel retailing • To look at the characteristics of the three major retail institutions involved with nonstore-based strategy mixes: direct marketing, direct selling, and vending machines – with an emphasis on direct marketing

3. Chapter Objectives_2 • To explore the emergence of electronic retailing through the World Wide Web • To discuss two other nontraditional forms of retailing: video kiosks and airport retailing

4. Different Channels for Retailing • Single Channel – sells to consumers through one retail format- can be store based or non store based • Multi channel – retailer sells to consumers through multiple retail formats : Wal-Mart selling thru its Wal-Mart stores, Sam’s Club, Web and Neighborhood Markets

5. Approaches to Retailing Channels Examples Mail order sporting goods selling only thru catalog Single Channel Retailing Store-based retailer with one format Mail order sporting goods selling thru Catalog and Web Store-based retailer selling thru catalogs Multi- Channel Retailing Mail order sporting goods selling thru Catalog, Web & Dept store Store-based retailer selling thru catalogs and web

6. Nonstore Retailing • Non store retailing is when they use strategy mixes that are not store-base to reach consumers and complete transactions • It exceeds $300 billion annually • 78% comes from direct marketing • Web-based retailing is fastest growing area

7. Nontraditional Retailing • Nontraditional retailing also includes formats that do not fit into the store and non-store based categories: • Video kiosks • Airport retailing

8. Direct Marketing • Customer is first exposed to a good or service through a nonpersonal medium and then orders by mail, phone, fax, or computer • Annual U.S. sales exceed $235 billion • Other leading countries with strong DM • Japan • Germany • Great Britain • France • Italy

9. Characteristics of Direct Marketing Customers Typical Direct Marketing Consumer is • Married • Upper middle class • 36-50 years old • Desires convenience, unique merchandise, good prices

10. GENERAL offer full lines of products from clothing to housewares J.C. Penney QVC SPECIALTY offer narrow product lines L.L. Bean Franklin Mint Direct Marketing Categories

11. Strategic Business Advantages of Direct Marketing • Reduced costs • Lower prices • Large geographic coverage • Convenient to customers • Ability to pinpoint customer segments • Ability to eliminate sales tax for some • Ability to supplement regular business without additional outlets

12. Strategic Business Limitations of Direct Marketing • Products cannot be examined prior to purchase • Costs may be underestimated • Response rates to catalogs under 10% • Clutter exists • Long lead time required • Industry reputation sometimes negative

13. Domain of Direct Marketing • Direct marketing is a form of retailing in which a consumer is exposed to a good or service through a nonpersonal medium and then orders by mail, phone, fax or computer. • Viewed as an interactive system • DM includes any catalog, mail, TV, radio, magazine, newspaper, phone directory, fax or ad; computer-based transaction or any non personal contact that stimulates customers to place a order by phone, fax, mail or computer.

14. Database Retailing- Data base key to success • Collection, storage, and usage of relevant customer information • name • address • background • shopping interests • purchase behavior • Observation of 80-20 rule

15. Emerging Trends in Direct marketing • Evolving activities • Changing customer lifestyles • Increasing competition • Increasing usage of dual distribution channels • Changing media roles, technological advances, and global penetration

16. Increasing usage of dual distribution channels • More retailers adding web site, catalogs, Television ads to reach consumers and stay competitive.

17. Changing media roles, technological advances, and global penetration • Many firms printing multi catalogs, specialogs • Specialogs catalogs emphasizes a limited number of items and has reduced postage and productions costs • Infomercials is a program length TV commercial that airs on cable or broadcast TV, often during late night fringe - (30-60 minutes in length) • Technology allows for better targeting with special media

18. Evolving activities • Technology is a big factor in success of nonstore retailing • Multi-channel retailing is utilized by many more firms today • Increased focus on data-based retailing • Firms have privacy policies

19. Changing customer lifestyles • Consumers’ life-styles have shifted dramatically over the past 35 years • Large number of working women • Therefore, they don’t have time to shop as before. That’s why some forms of nonstore retailing is gaining popularity

20. Increasing competition • More companies now compete in direct marketing format • More companies in market due to lower entry costs and ease of operation • Direct marketing lures many small firms which are under capitalized and have high failure rates

21. Factors consumers consider to Select Direct Marketer • Company reputation and image • Ability to shop whenever consumer wants • Types of goods and services • Availability of toll-free phone number or Web site for ordering • Credit card acceptance • Speed of promised delivery time • Competitive prices • Satisfaction with past purchases and good return policy

22. Steps in Executing a Direct Marketing Strategy • Business definition 2. Generating customers • Media selection 3. Presenting the message 4. Customer contact • 5. Customer responses 6.Order fulfillment and • 7. Measuring results -- Feedback

23. Executing a Direct Marketing Strategy • Business definition – What format? single channel or multi channel format • Generating customers – How will you get your customer database? – several ways to do it (pg 136) • Media Selection - Several alternatives available – one or multiple types of media

24. Printed catalogs Direct-mail ads and brochures Inserts with monthly credit card and other bills (statement stuffers) Freestanding displays Ads or programs in mass media Banner ads or hot links on the Web Video kiosks Media Selection

25. Executing a Direct Marketing Strategy Cont’d • Presenting message – develop an effective message that will engender interest, create right image, provide data on products • Customer contact – Do you contact all in data base or selective ones? How often to contact? • Customer response I one of 3 ways, order, request more information, or ignore the message

26. Outcome Measures • Overall Response Rate • Average Purchase Amount • Sales Volume by Product Category • Value of list brokers Important to analyze results because feedback can help to update data base, product mix and promotion programs

27. Issues Facing Direct marketers • Many people dislike one or more aspects of direct marketers • Most dissatisfied with late deliveries, deceptive claims, and broken or damage merchandise • Most people would like to receive less direct mail pieces although most open all mail • Consumers are concerned with their personal information being sold • Direct marketers must battle the legal environment to make sure more restrictive laws are not passed

28. Direct Selling( a form of nonstore retailing) • Direct selling includes both personal contact with consumers in their homes and other non store locations such as offices and phone solicitations initiated by a retailer • $27 billion in annual sales • Mkt strategy emphasizes convenient shopping and a personal touch

29. Table 6.1 Snapshot of U.S. Direct Selling Industry

30. Table 6.1 Snapshot of U.S. Direct Selling Industry

31. Reasons for Slow Growth of Direct Selling • More women working • Better job opportunities in other fields have reduced pool of qualified people • Firm’s mkt coverage is limited by size of sales force • Sales productivity is low and average sale is small • 25-50% of sales is commission to sales people which makes prices higher to consumers • Various legal restrictions apply due to high pressure and often deceptive tactics of sales people

32. Vending Machine Sales (form of nonstore retailing) • Vending machines is a cash or card-operated retailing format that dispenses goods or services • Eliminates the need for sales personnel • $40 billion in annual U.S. sales • 85 % of merchandise is beverages • Cigarette sales have gone from 25% of sales to 2% • Items over $1.50 don’t sell well

33. Electronic Retailing is growing • Internet is a global electronic super highway of computers networks that use a common protocol and are linked by telecommunication lines and satellite • World Wide Web (Web) is a way to access information on the internet, whereby users use easy to use Web addresses and web pages.

34. The Role of the Web • Project a retail presence • Enhance image • Generate sales • Reach geographically-dispersed customers • Provide information to customers • Promote new products • Demonstrate new product benefits

35. The Role of the Web_2 • Provide customer service (e.g., e-mail) • Be more “personal” with consumers • Conduct a retail business efficiently • Obtain customer feedback • Promote special offers • Describe employment opportunities • Present information to potential investors, franchisees, and the media

36. Figure 6.6 Web-Based U.S. Retail Sales Greatest percentage is for computer hardware/software -25% Apparel is only 7.5 % Books and magazines 7.0% Electronics and appliances – 5.4%

37. Figure 6.8 Five Stages of Developing a Retail Web Presence 1. Brochure Web Site 2. Commerce Web Site 3. Integrated Web Site 4. The ‘Webified’ Store 5. Site Integrated with Manufacturer Systems

38. Why Use the Web information entertainment interactive communications `Why Shop Online selection prices convenience fun Information on Web Usage

39. Reasons NOT to Shop Online Trust Fear Lack of security Lack of personal communication

40. Characteristics of Web Users • About equal number of males and females 47% Females vs. 53% males • Educated with good income average income of $50K or above 75% have at least attended college • Those shopping on web, over half spend $250 or more and 67% shop at 5 times

41. Recommendations for Web Retailers • Develop or exploit a well-known, trustworthy retailer name • Tailor the product assortment for Web shoppers • Enable the shopper to click as little as possible • Provide a solid search engine • Use customer information

42. Other nontraditional forms of Retailing • Video Kiosks- a freestanding, interactive, electronic computer terminal that displays products and related information on a video screen • 1.5 mm in U.S. and account for $3 billion in sales • Very flexible and can be located in many different places

43. Other nontraditional forms of Retailing • Airport Retailing – major retailing mecca • Large potential markets • Variety of retailers such as fast food, gift shops and now some mall specialty retailers are moving to the airport.. Walden Bookstore • Generates annual sales of $6 billion

44. Features of Airport Retailing • Large group of prospective shoppers • Captive audience • Strong sales per square foot of retail space • Strong sales of gift and travel items • Difficulty in replenishment • Longer operating hours • Duty-free shopping possible

45. Questions