Chapter 66

Web, Nonstore-Based, and Other Forms of Nontraditional Retailing

Dr. PointerDr. Pointer

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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

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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

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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

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Approaches to Retailing Channels Examples

Store-based retailer with

one format

Mail order sporting goods

selling thru Catalog and Web

Mail order sporting goods

selling only thru catalog

Store-based retailer selling thru catalogs

Store-based retailer selling

thru catalogs and web

Mail order sporting goods

selling thru Catalog, Web &

Dept store

Single Channel

Retailing

Multi- Channel Retailing

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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 annually78% comes from direct marketingWeb-based retailing is fastest growing

area

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Nontraditional Retailing

Nontraditional retailing also includes formats that do not fit into the store and non-store based categories:Video kiosksAirport retailing

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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 billionOther leading countries with strong DM

* Japan* Germany* Great Britain

*France*Italy

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Characteristics of Direct Marketing Customers

• Married• Upper middle class• 36-50 years old• Desires convenience, unique

merchandise, good prices

Typical Direct Marketing Consumer is

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Direct Marketing Categories

GENERAL

• offer full lines of products from clothing to housewares

– J.C. Penney– QVC

SPECIALTY

• offer narrow product lines

– L.L. Bean– Franklin Mint

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Strategic Business Advantages of Direct Marketing

Reduced costsLower pricesLarge geographic coverageConvenient to customersAbility to pinpoint customer segmentsAbility to eliminate sales tax for someAbility to supplement regular business

without additional outlets

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Strategic Business Limitations of Direct Marketing

Products cannot be examined prior to purchase

Costs may be underestimatedResponse rates to catalogs under 10%Clutter existsLong lead time requiredIndustry reputation sometimes negative

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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.

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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

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Emerging Trends in Direct marketing

Evolving activitiesChanging customer lifestylesIncreasing competitionIncreasing usage of dual distribution

channelsChanging media roles, technological

advances, and global penetration

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Increasing usage of dual distribution channels

• More retailers adding web site, catalogs, Television ads to reach consumers and stay competitive.

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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

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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

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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

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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

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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

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Steps in Executing a Direct Marketing Strategy

1. Business definition 2. Generating customers

2. Media selection 3. Presenting the message 4. Customer contact

5. Customer responses 6.Order fulfillment and

7. Measuring results -- Feedback

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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

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Media Selection

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

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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

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Outcome Measures

Overall Response RateAverage Purchase AmountSales Volume by Product CategoryValue of list brokers

Important to analyze results because feedback can help to update data base, product mix and promotion

programs

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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

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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

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Table 6.1 Snapshot of U.S. Direct Selling Industry

Major Product Groups % of IndustryHome/ family care products 33.7

Personal care products 26.4

Services 16.9

Wellness products 16.5

Leisure/ educationalproducts

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Table 6.1 Snapshot of U.S. Direct Selling Industry

Place of Sales % of IndustryIn the home 64.4

Over the phone 14.7

In a workplace 8.7

Over the Internet 5.5

Other 6.7

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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

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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

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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.

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The Role of the Web

Project a retail presenceEnhance imageGenerate salesReach geographically-dispersed

customersProvide information to customersPromote new productsDemonstrate new product benefits

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The Role of the Web_2

Provide customer service (e.g., e-mail)Be more “personal” with consumersConduct a retail business efficientlyObtain customer feedbackPromote special offersDescribe employment opportunitiesPresent information to potential

investors, franchisees, and the media

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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%

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Figure 6.8 Five Stages of Developing a Retail Web Presence

1. Brochure Web Site2. Commerce Web Site3. Integrated Web Site4. The ‘Webified’ Store5. Site Integrated with Manufacturer Systems

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Information on Web Usage

Why Use the Web– information– entertainment– interactive

communications

`Why Shop Online– selection– prices– convenience– fun

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Reasons NOT to Shop Online

TrustFear

Lack of securityLack of personal communication

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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

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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 engineUse customer information

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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

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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

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Features of Airport Retailing

Large group of prospective shoppersCaptive audienceStrong sales per square foot of retail

spaceStrong sales of gift and travel itemsDifficulty in replenishmentLonger operating hoursDuty-free shopping possible

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Questions