Chapter 3 Electronic and Nonstore Retailing
Irwin/McGraw-Hill
Levy/Weitz: Retailing Management, 4/e
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
PPT 3-1
Types of Nonstore Retailers
McGraw-Hill/Irwin
Levy/Weitz: Retailing Management, 4/e
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
PPT 3-2
Sales by Nonstore Format
McGraw-Hill/Irwin
Levy/Weitz: Retailing Management, 4/e
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
PPT 3-3
Shopping Electronically from Home or Going to the Mall? McGraw-Hill/Irwin
Levy/Weitz: Retailing Management, 4/e
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
PPT 3-4
What’s the Big Deal About Shopping on the Internet?
• $2.5 Trillion US Retail Sales • $186 Billion Catalog and Direct Sales • $ 4 Billion TV Home Shopping • $ 24 Billion Internet Retailing Interactive Home Shopping Forecasted Sales by 2005 up to $500 Billion McGraw-Hill/Irwin
Levy/Weitz: Retailing Management, 4/e
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
PPT 3-5
On the Other Hand
• Younger people are growing up with computers view them as an appliance • 45% of U.S. households have Internet access now and more have access at work • Women use the Internet almost as much as men now • 30% of people buying cars go to the Internet for info before seeing a dealer
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Levy/Weitz: Retailing Management, 4/e
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
PPT 3-6
•
What Can You Buy Now on the Internet? Not much and it isn’t easy
• “Successful” Internet retailers Dell, Gateway Computers Amazon.Com Travel Services Gifts 1800FLOWERS Niche Products Mustard.com
McGraw-Hill/Irwin
Levy/Weitz: Retailing Management, 4/e
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
PPT 3-7
Niche Products Sold Over Internet
SEE WEB SCREEN ON PAGE 80 OF THE TEXTBOOK
McGraw-Hill/Irwin
Levy/Weitz: Retailing Management, 4/e
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
PPT 3-8
Impediments to Shopping OnLine
• Technological concerns are becoming less important – Access to Internet – Bandwidth – Privacy, Security concerns
Are the benefits of shopping online greater than the benefits of going to a store?
McGraw-Hill/Irwin
Levy/Weitz: Retailing Management, 4/e
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
PPT 3-9
Factors Affecting the Diffusion of an Innovation
• Ease with which the innovation can be tried out – Online access
• Perceived risks of adoption – Security, Privacy
• Perceived benefits compared to present alternatives (going to store or buying from catalogs)
McGraw-Hill/Irwin
Levy/Weitz: Retailing Management, 4/e
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
PPT 3-10
Internet Users Across the Globe
McGraw-Hill/Irwin
Levy/Weitz: Retailing Management, 4/e
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
PPT 3-11
Don’t Be Mislead by Present Internet Offering
• Present Internet Applications Do Not Reflect Potential Benefits that Will be Offered to Consumers – Unique Characteristics of Internet Not Exploited Electronic Catalogs, Magazines – Little Personalization and Interactivity
McGraw-Hill/Irwin
Levy/Weitz: Retailing Management, 4/e
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PPT 3-12
Illustration Judy Jamison Part 1
Judy Jamison sits in front of her home electronic center reviewing her engagement calendar displayed on her TV screen. She sees that she has accepted an invitation to a formal cocktail party on Friday night and decides to buy a new dress for the occasion. She switches to her personal electronic shopper, FRED, and initiates the following exchange: FRED: Do you wish to browse, go to a specific store, or buy a specific item? Judy:
Specific item.
FRED: Type of item? Judy:
Black dress.
FRED: Occasion? (menu appears on screen) Judy:
Formal cocktail party
McGraw-Hill/Irwin
Levy/Weitz: Retailing Management, 4/e
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
PPT 3-13
Illustration Judy Jamison Part 2
FRED: Price range? (menu appears) Judy:
$300 $500
FRED: 497 items have been identified. How many do you want to review? Judy:
5
Five pictures of Judy in each dress appear on the screen with the price, brand name, and the IHS retailer selling it listed beneath each one. Judy clicks on one of the dresses and it is enlarged on the screen. Another click and Judy views the dress from different angles. Another click and specifications such as fabric and laundering instructions appear. Judy repeats this routine with each dress. She selects the one she finds most appealing. FRED knows her measurements and picks the size that fits her best. McGraw-Hill/Irwin
Levy/Weitz: Retailing Management, 4/e
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
PPT 3-14
Illustration Judy Jamison Part 3
FRED: How would you like to pay for this? (menu appears) Judy:
American Express
FRED: Nieman Marcus [the firm selling the dress Judy selected] suggests a Xie scarf and Koslow belt to compliment the dress. [Judy clicks on the items and they appear on the screen. Judy inspects these items as she inspected the dresses. She decides to purchase both accessories. FRED then asks Judy about delivery. Judy selects two day delivery at a cost of $5.00] FRED: Just a reminder. You have not purchased hosiery in 30 days. Do you wish to reorder at this time? Judy:
Yes
FRED: Same shades? Judy:
Yes
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Levy/Weitz: Retailing Management, 4/e
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
PPT 3-15
•
Why Do People Patronize a Retailer?
Merchandise Assortments
• Service Convenience Information to make good selections • Price Total cost to customer Go to store, find right merchandise, return merchandise • Entertainment
• Social interaction McGraw-Hill/Irwin
Levy/Weitz: Retailing Management, 4/e
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
PPT 3-16
Potential Customer Benefits Offered by Electronic Retailing • Vast
number of alternatives • Information tailored to individual consumers • to help them make easier and better • purchase decisions
Super sales associate
Side by side comparisons
Full motion video
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Levy/Weitz: Retailing Management, 4/e
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PPT 3-17
McGraw-Hill/Irwin
Using an Agent to Locate Merchandise
Levy/Weitz: Retailing Management, 4/e
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PPT 3-18
SideBySide Comparisons
SEE EXHIBIT 3-5 WEB SCREEN ON PAGE 88 OF THE TEXTBOOK
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Levy/Weitz: Retailing Management, 4/e
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PPT 3-19
•
Merchandise Sold Successfully Over the Internet
“Look and See” attributes vs. “Touch and Feel” attributes (?)
• Degree to which information can be used to predict satisfaction prior to purchase • Might not need to “Touch and Feel” “Touch and Feel” not useful Gifts Superior presentation of “Touch and Feel” Branding
McGraw-Hill/Irwin
Levy/Weitz: Retailing Management, 4/e
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PPT 3-20
Selling “Touch and Feel” Merchandise Over the Internet
SEE WEB SCREEN ON PAGE 90 OF THE TEXTBOOK
McGraw-Hill/Irwin
Levy/Weitz: Retailing Management, 4/e
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
PPT 3-21
Who Has the Capabilities to Be A Successful Electronic Retailer?
Catalog Retailers Assortments Limited
Store-Based Vendors Retailers Excellent Poor
Fulfillment
Excellent
Good
Poor
Customer Excellent Information
Good
Poor
Unique Good Merchandise
Good
Excellent
Reputation
Some Excellent
Some Excellent
McGraw-Hill/Irwin
Some Excellent
Levy/Weitz: Retailing Management, 4/e
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
PPT 3-22
Internet Applications for Storebased Retailers
• Building Brand Name and Store Image – Limited Reach and Frequency – Rational Versus Emotional Appeals – Managing Virtual Communities
• PreShopping Information • Selling Merchandise
McGraw-Hill/Irwin
Levy/Weitz: Retailing Management, 4/e
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
PPT 3-23
Issues
• Need for Search Engines Fred – Who Owns the Search Engine Consumer, Manufacturer, Virtual Community Manager, Retailer/Dealer
• Method for Efficient Delivery to Homes for Lower Priced Merchandise • Strategies for Reducing Price Competition for Branded Merchandise
McGraw-Hill/Irwin
Levy/Weitz: Retailing Management, 4/e
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
PPT 3-24
Storebased Retailers Vs Electronic Retail Entrepreneurs
• Knowledge of Retailing – Assortment Planning – Distribution Systems
• Reputation • Customer Database • Convenient Location for Picking Up, Returning Merchandise, Warranty Service and Installation • Vendor Relationships McGraw-Hill/Irwin
Levy/Weitz: Retailing Management, 4/e
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
PPT 3-25
StoreBased Retailers Must Go Beyond Putting a Toe in Water
• Overly Concerned About Cannabalization • Strengthen Brand Name to Attract Hits • Provide Personalization Benefits in Website • Develop Private Label Merchandise • Build Customer Database and Distribution System • Focus on Exploiting Synergies – Delivery and Returns, Installation, Service – Offer Complementary Assortments Not Economically Stocked in Stores
McGraw-Hill/Irwin
Levy/Weitz: Retailing Management, 4/e
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
PPT 3-26
Winners and Losers
• Catalog Retailers Are Well Positioned • Most Vendors Will Not Be Able to Effectively Selling Directly to Consumers • StoreBased Retailers Have Strong Potential But Need to Exploit the Unique Benefits of Internet Personalization
McGraw-Hill/Irwin
Levy/Weitz: Retailing Management, 4/e
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
PPT 3-27
•
Advantages of Retailers vs. Manufacturers
Distribute Merchandise Directly to Customers
• Provide Assortments • Collect and Use Information about Customers
Widespread Disintermediation Unlikely
McGraw-Hill/Irwin
Levy/Weitz: Retailing Management, 4/e
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
PPT 3-28
Summary
• Present Electronic Retailing Does Not Reflect the Future Potential Electronic Retailing Will Attract a Significant Segment Much More than Catalogs • Penetration of Electronic Retailing Will Be A Function of the Degree To Which Retailers Take Advantage of the Unique Properties of the Internet Personalization and Interactivity • Search Agents Are Critical to Provide Consumer Benefits • StoreBased Retailers Are Well Positioned to Exploit This Opportunity But Might Not McGraw-Hill/Irwin
Levy/Weitz: Retailing Management, 4/e
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
PPT 3-29
Virtual Communities
• John Hagel III and Arthur G. Armstrong, Net Gain: Expanding Markets Through Virtual Communities. Boston: Harvard Business School Press, 1998 • Definition: Virtual community is a network of members sharing common interests that interact with each other electronically.
McGraw-Hill/Irwin
Levy/Weitz: Retailing Management, 4/e
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
PPT 3-30
Virtual Communities
• Virtual community is a network of members sharing common interests that interact with each other electronically. • Examples: – IVillage Women – Garden.Com Gardeners – Ibelieve.com
McGraw-Hill/Irwin
Levy/Weitz: Retailing Management, 4/e
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
PPT 3-31
Key To OnLine Success
“Commercial success in the online area will belong to those who organize virtual communities to meet multiple social and commercial needs. By creating strong virtual communities, businesses will be able to build membership audiences and use these audiences to bring in revenues in the form of advertising, transaction fees, and membership fees.” Pg 5.
McGraw-Hill/Irwin
Levy/Weitz: Retailing Management, 4/e
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
PPT 3-32
Garden.Com Solving a Customer’s Gardening Problems
McGraw-Hill/Irwin
Levy/Weitz: Retailing Management, 4/e
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
PPT 3-33
Garden.Com Solving a Customer’s Gardening Problems
McGraw-Hill/Irwin
Levy/Weitz: Retailing Management, 4/e
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
PPT 3-34
The Knot Solving Your Wedding Problems
McGraw-Hill/Irwin
Levy/Weitz: Retailing Management, 4/e
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
PPT 3-35
Value Proposition to Members
• Full range of resources available to solve problem or satisfy from one source. • Integrate content and communication => maximizing value of the available resources • Generation and dissemination of member generated information increases quality, breadth and depth of information.
McGraw-Hill/Irwin
Levy/Weitz: Retailing Management, 4/e
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
PPT 3-36
Value Proposition for Members
• Meaningful personal relationships Opportunity to interaction with other people with common interests draws people to community. • Fantasy and entertainment • Access to competing vendors and publishers
McGraw-Hill/Irwin
Levy/Weitz: Retailing Management, 4/e
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
PPT 3-37
Value Proposition for Commercial Organizer
• Reduce cost of locating and targeting customers • Reduce cost of motivating customers to make purchase decisions • Opportunity for tailoring products, services, • Lower capital investment – don’t have to build store fronts. • Broader geographic reach
McGraw-Hill/Irwin
Levy/Weitz: Retailing Management, 4/e
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
PPT 3-38
• • • • • • • •
Sources of Revenue Subscription fees – fixed monthly charge Usage fee – charge based on usage Membership fees Content delivery fees – charge to download information Service fee – notification fee Advertising Transaction commissions Sales of membership list or access to members
McGraw-Hill/Irwin
Levy/Weitz: Retailing Management, 4/e
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
PPT 3-39
Who Is Best Suited to Organize a Virtual Community?
• Concerned Consumers • Content Providers Vertical Publications • Suppliers • Retailers – Offering Competing Products – Unbiased, Good Reputation – Know How to Run a Business Selling to Consumers Primary Revenue Source McGraw-Hill/Irwin
Levy/Weitz: Retailing Management, 4/e
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
PPT 3-40
• • • •
Benefits for Community Manager Strengthen Brand Name, Reputation Build Customer Relationships Extend Database of Potential Customers Revenue Generation – Sell Merchandise – Sell Services to Members • Membership fees (Annual Charge for Access) • Usage fee (Downloads, Time of Access) • Advertising (Charge Advertisers)
McGraw-Hill/Irwin
Levy/Weitz: Retailing Management, 4/e
Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.