Electronic And Nonstore Retailing

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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

McGraw-Hill/Irwin

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

Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

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

McGraw-Hill/Irwin

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

McGraw-Hill/Irwin

Levy/Weitz: Retailing Management, 4/e

Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

PPT 3-17

McGraw-Hill/Irwin

Using an Agent to Locate Merchandise

Levy/Weitz: Retailing Management, 4/e

Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

PPT 3-18

Side­By­Side Comparisons

SEE EXHIBIT 3-5 WEB SCREEN ON PAGE 88 OF THE TEXTBOOK

McGraw-Hill/Irwin

Levy/Weitz: Retailing Management, 4/e

Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

PPT 3-19



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

Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved.

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.

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