Multichannel RETAILING a View Into the Future

CHAPTER 3

multichannel RETAILING – a view into the future

CONVERSION NOTES

Berman & Evans: / Chapter 6

CASES AND ANCILLARY CASES

CASE 3: Gadzooks Targets the Teen Market

Synopsis: Gadzooks is a specialty retailer of casual clothing and accessories targeted specifically to teenagers. The case describes Gadzooks' positioning, vision and merchandizing strategies and demonstrates how Gadzooks' is taking advantage of specific niche opportunities in the teenage market.

CASE 4: Sears Looks for a New Direction

Synopsis: Sears is a well-known department store, in operation since its beginnings as a watch merchant in 1886 and as a store in 1925. The case traces the history of Sears, including some prominent ups and downs, as well as the competitive environment, including recent competition from discount stores. It describes Sears' strategy in the 1990s to emerge from bankruptcy and regain the prominence it once had in American retailing.

CASE 5: Toys "R" Us Online

Synopsis: This case details the Internet channel strategy pursued by Toys "R" Us and the eventual decline of consumer confidence and negative publicity received by the firm due to fulfillment and logistics problems in the holiday season of 1999. The case describes the strategies pursued by the firm since then and its eventual partnership with Amazon.com for the operations, customer service and fulfillment for its online site.

CASE 6: Wedding Channel.com

Synopsis: Wedding Channel.com is a unique and comprehensive channel that not only helps would-be brides and grooms obtain information and help plan their wedding, but also provides critical products through online shops for both the couple and their guests. The case describes the core business model of the site as well as enumerates the various sources of value to consumers as well as partnering retailers.

CASE 15: Avon Embraces Diversity

Synopsis: Avon, the largest cosmetics firm in the United States, sells primarily through the direct selling method using about 3.5 million sales representatives in about 143 countries around the world. The case describes Avon's turnaround strategy since the 1970s when it started actively promoting diversity, by including more women and minorities in the top and middle management levels.

CASE 21: eBay

Synopsis: eBay pioneered online person-to-person trading by developing a web-based community in which buyers and sellers are brought together in an efficient and entertaining auction format to buy and sell personal items such as antiques, coins, collectibles, memorabilia, stamps, and toys.

CASE 26: Sephora

Synopsis: Sephora is a beauty products retailer, headquartered in France and operating retail stores in multiple countries in Europe and the United States. It has expanded rapidly in the United States since the first store opening in mid-1998. The case describes the phenomenal success of Sephora retail stores, its philosophy and strategy as well as the success of its Internet retail site.

Ancillary Case A6: Mustafa Center: Singapore’s All-in-One Retailer

Synopsis: Mustafa Center is a well-known retailer in Singapore that provides one-stop shopping. The store combines a department store, grocery store, pharmacy, hotel, and services retailing including currency exchange and travel agency.

Ancillary Case A8: Monarch Department Stores

Synopsis: Monarch Department Stores is experiencing the prospect of a declining rate of sales growth. The company president sets up a top management committee to evaluate the possibility of increasing the growth rate through becoming more involved in nonstore retailing. The team has made its report. The president must now choose from among the nonstore alternatives proposed by the management committee. (Note: Monarch stores is a fictitious company.)

Ancillary Case A9: A Great Catalog Item

Synopsis: A hypothetical department store also has a catalog sales retail operation. Department manager is irritated when she has to send remaining inventory on a hot item to the warehouse to cover catalog sales.

Ancillary Case A11: Toys "R" Us

Synopsis: Describes changes made by Toys "R' Us to its retail market strategy and explores issues of adaptation to changing consumer needs and growth strategies.

VIDEOS

Video Segment 8: Ibelieve.com: A Virtual Community

Teaching Use: Stimulate discussion of a multichannel outreach involving a virtual community.

Featured Retailer:

Ibelieve.Com

Summary

Ibelieve.com is an internet gathering place, a virtual community, for Christians worldwide who are concerned about family values and morality, that come together and experience and grow in their faith. The site expands the public's understanding and practice of religion by offering news stories, features and opinion pieces about people of various faiths, commentaries, chat rooms, and self-help advice. MyStore at the site sells more than 70,000 items. The for-profit site was launched with $ 30 million from Ibelieve.com's parent company, Family Christian Stores, the country's largest Christian retail chain.

Video Segment 9: eBay and the World of Online Auctions

Teaching Use: Unique retail concept using the Internet.

Featured Retailer:

eBay

Summary:

Founded in September 1995, eBay is the most financially successful eBusiness. It provides a marketplace for the sale of goods and services by individuals and businesses. The eBay community includes tens of millions of registered members from around the world. People spend more time on eBay than any other online site, making it the most popular shopping destination on the Internet. On any given day, there are more than 12 million items listed on eBay across 18,000 categories. In 2002, eBay members transacted $14.87 billion in annualized gross merchandise sales (GMS, the value of goods sold on eBay).

At the site people can buy and sell items across multiple categories, including antiques and art, books, business & industrial, cars & other vehicles, clothing & accessories, coins, collectibles, crafts, dolls & bears, electronics & computers, home furnishings, jewelry & watches, movies & DVDs, music, musical instruments, pottery & glass, real estate, sporting goods & memorabilia, stamps, tickets, toys & hobbies and travel.

eBay offers a wide variety of features and services that enable members to buy and sell on the site quickly and conveniently. Buyers have the option to purchase items in auction-style format or items can be purchased at fixed price through a feature called Buy-It-Now. In addition, items at fixed price are also available Half.com, an eBay company.

ANNOTATED OUTLINE

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INSTRUCTOR NOTES

I. Retail Channels for Interacting with Customers

·  Retailers are either classified as store-based or nonstore (electronic, catalog/direct mail, direct selling, TV home shopping, and vending machine) retailers. However, many firms use more than one channel to reach their customers.
·  A multi-channel retailer is a retailer that sells merchandise and/or services through more than one channel. By using a combination of channels, retailers can exploit the unique benefits provided by each channel. / See PPT 3-3, 3-4, 3-5
Ask students to provide examples of retailers who use multiple channels. What are the various channels used by each? Do the students giving these examples use all the channels? If so, how and when?

A. Store Channel

·  Stores offer a number of benefits to customers that they cannot get when shopping through catalogs and the Internet. These benefits include:
·  Browsing. While many consumers surf the Internet and look through catalogs for ideas, most consumers still prefer browsing in stores.
·  Touching and Feeling Products. Perhaps the greatest benefit offered by stores is to allow customers to use all of their senses when examining products- touching, smelling, tasting, seeing, and hearing.
·  Personal Service. Store sales associates still have the capability of providing meaningful, personalized information. Customers for durable goods, such as appliances, report that salespeople are the most useful information source.
·  Cash Payments. Stores are the only channel that accept cash payments. Many customers prefer to pay cash because it is easy, resolves the transaction immediately, and does not result in potential interest payments.
·  Immediate Gratification. Stores have the advantage of allowing customers to get the merchandise immediately after they buy it.
·  Entertainment and Social Experience. In-store shopping can be a stimulating experience for some people, providing a break in their daily routine and enabling consumers to interact with friends. All nonstore retail formats are limited in the degree to which they can satisfy these entertainment and social needs. / See PPT 3-6
Ancillary Lecture 3-1 is designed to review this material. Ancillary Assignment 3-3 can be used to familiarize students with the electronic shopping experience.
Exhibit 3-1 lists the unique benefits of stores, catalogs, and the Internet.
Ask students if they consider any store to be their favorite for shopping. In other words, do they look forward to shopping at that store? If so, why?

B. Catalog Channel

·  Convenience. Catalogs, like all nonstore formats, offer the convenience of looking at merchandising and placing an order any day at any time from almost anywhere.
·  Safety. Nonstore retail formats have an advantage over store-based retailers by enabling customers to review merchandise and place orders from a safe environment – their homes.
·  Quality of Visual Presentation. The photographs of merchandise in catalogs, while not as useful as in-store presentations, are superior to the visual information that can be displayed on a CRT screen. / See PPT 3-7
Ask students: If the course schedule listing for each semester also had a corresponding list of prescribed texts for each course at the same prices as the campus bookstore and a convenient toll-free telephone number, would they buy their text through this catalog? Why or Why not?

II. Electronic Retailing Issues

A. Benefits Offered by Electronic Channel
·  In addition to the convenience and security of shopping from home or work at any time, the electronic channel has the potential for offering a greater selection of products and more personalized information about products and services. These benefits include: (1) broader selection, (2) more information to evaluate merchandise, (3) personalization, and (4) problem-solving information. / See PPT 3-8, 3-41, 3-42, 3-43
PPT 3-9 to 3-33 detail Sears' evolution into a multichannel retailer.
1. Broader Selection
·  A potential benefit of the electronic channel, compared to the other two channels, is the vast number of alternatives available to consumers. However, the advantages of having a lot of alternatives is only meaningful if one can have some mechanism to search through them and find a few items one might like to look at in detail. / Ask students about the products and purchase situations where the broader selection offered by the Internet may be particularly useful.
2. More Information to Evaluate Merchandise
·  Using an electronic channel, retailers have the capability of providing as much information as each customer wants, more information than they can get through store and catalog channels. The electronic channel can respond to customers' inquiries just like a sales associate would. Also, information on the electronic channel database can be frequently updated and will always be available. The cost of adding information to an electronic channel is likely to be far less than the cost of continually training thousands of sales associates. / Query students on a new purchase context, say, buying a good home theater system. If they do not know anything about the product or how to evaluate it, where would they look for information first – the Internet or the local electronics store? What are the reasons behind this choice of channel?
3. Personalization
·  Electronic channels can economically personalize the information for each customer. An electronic agent can search through a wide range of alternatives, select a small set for the customer to look at in detail, and provide the information that the customer typically considers. An electronic agent is a computer program that locates and selects alternatives based on predetermined characteristics. The agent could learn about a consumer's tastes by asking questions when it's installed on the consumer's computer or when the customer goes to the retailer's web site. These agents function as a super sales associate in a department store, helping customers locate merchandise they might like. / See PPT 3-46
Consider two lists of VHS tapes/DVDs available for rental. List 1 is organized alphabetically. List 2 provides 10 items at a time ordered in any manner that the customer wants – according how big a hit the movie was when it was first released in a theater, the leading stars, the director, etc. Which list will be preferred? Why?
4. Problem-solving Information
·  The electronic channel also offers an opportunity to go beyond the traditional product information offered in stores to provide tools and information for solving customer problems (e.g., planning a wedding)
·  Virtual communities, networks of people who seek information, products, and services and communicate with each other about specific issues, are examples of these problem solution sites (e.g., iVillage). / The decisions surrounding various contexts can be quite complicated and involve a number of different decisions, such as weddings or home buying. Several Internet sites provide comprehensive information and insights on such decision contexts.
See PPT 3-47, 3-48, 3-49
B. Will Sales through the Electronic Channel for Shopping Continue to Grow?
·  The electronic channel accounts for about 1% retail sales in the U.S and Europe and an even smaller percentage in Asia. However, the annual growth of U.S. electronic retail sales is four to five times greater than sales in retail stores.
·  Three critical factors affecting the adoption of a new innovation such as shopping electronically are: (1) the ease with which customers can try the innovation, (2) the perceived risks in adopting the innovation, and (3) the benefits offered by the innovation compared to the present alternatives. / See PPT 3-34, 3-35, 3-36
What advantages does shopping on the Internet have over shopping in a store? Shopping through a catalog?
See PPT 3-39
1. Trying Out Electronic Shopping
·  In the U.S., 66% of all primary home shoppers own a home computer and 63% have personal access to the Internet at home, school, or work. Online shopping has become a common practice in the U.S.
·  The substantial Internet usage by young people suggests a bright future for electronic retailing.
·  In the US, adults over 50 years old are the fastest growing market going online, now comprising almost 20% of the Internet users. Seventy percent of Americans in this age group have home access to the Internet. / See PPT 3-37