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MultiChannel RetailingBy Thia Mullen and Jennifer HillWhy are Retailers using Multiple Channels to Interact with Customers?Customers want to interact in different waysEach Channel offers different benefits for CustomersThe retailers can also reach more customers by using multiple channelsMore reasons for becoming a Multi-Channel RetailerIncrease in Share of WalletFor example: Eddie Bauer, single channel customers spend $100 -$200 per year, dual-channel customers spend $ 300-$500 per year, tri channel customers spend $800-$1000 per yearOvercome Limitations of Existing FormatProvide services more cost efficientlyLeverage of Existing AssetsBrand Name, Inventory, Customer DatabaseDevelop Insights in Customer Shopping Behavior

Dollars spent at different channels: Average annual dollars spent by JCPenney customers

Why are Retailers using Multiple channels to Interact with Customers?

customer

Customers buy what they want, When they want, Whenever they wantAssignment OneCreate a video explaining two issues of multichannel retailing

Jessica ClutterShannon FrankeShaina LacherStacia WakeleyAaron MonteithJennifer CooperStore ChannelBenefitsBrowsingTouching and Feeling ProductsPersonal ServiceCash and Credit PaymentEntertainment and Social ExperienceImmediate GratificationRisk Reduction

Catalog ChannelBenefitsConvenienceSafetyPortability and easy access

Assignment TwoCreate a podcast to highlight a company that uses all three levels of multichannel retailing and explain if it makes them more successful or not.

Amanda StewartMatthew SullivanCassie FurcherRechinda BryantMatthew WaldenAssignment ThreeCreate a screencast or digital storytelling to explain three of the capabilities needed for multichannel retailing.

Tasha DorrnickMilton LawLindsey DanielsonRick NunezJessie Drury

Internet ChannelProvides convenience offered by catalogs and other non-store formatsCompared with store and catalog channels, has potential to offer greater selection of productsMore personalized information about products and services in relatively short amount of timeUnique opportunity to collect information about how consumers shop

Internet Channel Broader SelectionCompared with the other two channels, vast number of alternatives available to consumersConsumers can easily visit and select merchandise from broader array of retailersRetail websites typically offer deeper assortments of merchandise than are available in storesEnables them to satisfy consumer demand for less popular styles, colors, or sizes and still keep overall inventory costs low

Internet Channel More Information to Evaluate MerchandiseImportant service offered by retailers is provision of information to help customers make better buying decisionsDepth of information at retailers website can provide solutions to customer problemsRetailers can provide as much information as each customer wants More information than the customer could get through store or catalogMore Information to Evaluate MerchandiseInformation on an electronic channel database can be frequently updated and always availableCustomers can format information so they can effectively use it when evaluating productsVirtual communities networks of people who seek information, products, services and communicate with one another about specific issues

More Information to Evaluate MerchandiseSocial shoppers people who participate in virtual communitiesSome social shoppers will may spend two or three times amount of time traditional shoppers doMay not make a purchaseExperience of shopping they enjoy more than product or service

More Information to Evaluate MerchandiseMany retailers have added ability for customers to post reviewsProvide valuable feedback to buyers about what is liked or not likedRetailers ideally suited to offer problem-solving sites for customersHave skills to put together merchandise assortments, services, and information

Internet Channel PersonalizationPotential benefit is ability to personalize information for each customer economicallyCatalogs cannot tailor merchandise and information to needs and preferences to individual customersProvide personal service at a low cost

Personalization Personalized Customer ServiceTo improve customer service from an electronic channel, many retailers offer live, online chatsOnline chatEconomically attractive for retailersCost is less than an email and 1/3 the cost of a phone call

Personalization Personalized OfferingRetailers can personalize offerings for each customerCustomers can personalize web pagesRetailers can personalize promotionsCan test different promotions in real timeIf a 5% discount works better than $5 off, stay with more successful promotion

Selling Merchandisewith Touch-and-Feel AttributesDue to problems of providing touch-and-feel information, apparel retailers experience more return rates20% on purchases made through an electronic channel10% on purchases made in stores

Touch-and-Feel Role of BrandsBrands provide consistent experienceHelps overcome difficulty of not being able to touch and feelBecause consumers trust familiar brands, name brands sell successfullyNot just through electronic channels, but also through internet, catalogs, and TV home shopping

Touch-and-Feel Using TechnologyRetailers using technology to convert touch-and-feel information to look-and-see informationWebsites going beyond basic images and using 3D imaging and/or zoom technologyThe use of image-enhancing technologies has increased conversion rates and reduced returns

Touch-and-Feel Using TechnologyTo overcome limitations associated with trying on clothing, apparel retailers started using virtual modelsEnable consumers to see selected merchandise looks on an image with similar proportions

Touch-and-Feel GiftsSome information in a store is not much better than the information provided electronicallyStores offering little benefit over an electronic channel in terms of useful information provided about some merchandiseBuying gifts electronically offers benefit of saving time and effort of packing and sending gifts

Touch-and-Feel ServicesSome service retailers have been very successful over the internet

Look-and-see attributes of offering can be presented very effectively online

Using the Internet to Improve Multichannel Shopping ExperienceAn electronic channel can provide valuable insights into how and why customers shopInsights on if customers are dissatisfied or satisfied with experiencesValuable information for assortment planning would be customer willingness to substitute one brand for anotherCollecting data as customers navigate through a website is easy

Perceived Risks in Electronic ShoppingTwo critical perceived risksSecurity of credit card transactions on the internetAlmost all retailers use sophisticated technologies to encrypt communicationsPotential privacy violationsConsumers concerned about the ability of retailers to collect information about:Purchase historyPersonal informationSearch behavior

Evolution Toward Multichannel RetailingFour reasons traditional store-based and catalog retailers are placing more emphasis on electronic channelsElectronic channel gives opportunity to overcome limitations of primary existing formatRetailers can reach out to new marketsProviding multichannel offering builds share of walletEnables retailers to gain valuable insights into customers shopping behavior

Overcoming the Limitations of an Existing FormatGreatest constraints facing store-based retailers is size of storesAmount of merchandise that can be displayed and offered for sale in stores is limitedBy blending stores with internet-enabled kiosks, retailers can expand assortment to customers

Overcoming the Limitations of an Existing FormatAnother limitation is store-based retailers face is inconsistent executionKnowledge and availability vary across stores and within a store at different times during the dayDifficult for retailers selling new, complex merchandise

Expanding Market PresenceElectronic channel is attractive to firms with strong brand names but limited locations and distributionSome retailers are widely known for offering unique, high-quality merchandise, but require customers to travel

Increasing Share of WalletOffering an electronic channel may lead to some cannibalizationIf used synergistically with other channels could result in more total purchases from a retailerTraditional single-channel retailers can use one channel to promote services offered by other channels

Increasing Share of WalletA stores website can be advertised on:In-store signsShopping bagsCredit card billing statementsPoint of sale receiptsPrint or broadcast advertisingPhysical stores and catalogs also advertisements

33Increasing Share of WalletStore-based retailers can leverage stores to lower cost of fulfilling orders and processing returned merchandiseCustomers can be offered opportunity to pick up and return merchandise at retailers storesMany retailers will waive shipping fees if customer picks up merchandise in-store

Capabilities needed for Multichannel RetailingTo effectively operate and realize the benefits of multichannel retailing, firms need to have the skills to:Develop assortments and manage inventoryManage People in remote locationsEfficiently distribute merchandise to storesPresent merchandise effectively in a printed format and distrubute catalogsPresent merchandise effectively on a Web siteProcess orders from individual customers electronicallyEfficiently distribute merchandise to homes and accept returnsIntegrate information systems to provide a seamless customer experience across channelsWho has these Critical Resources?Capabilities for Multi-Channel Retailers

Resources Needed to Compete Efficiently in Internet RetailingEasy to use websiteManagement Information SystemOrder ProcessingCustomer databasePersonalization software

Resources Needed to Compete Efficiently in Internet RetailingRetailing SkillsManaging InventoryEditing assortmentEfficient Fulfillment SystemsSignificant costs- last milePicking and packing individual ordersHandling returns reverse distributionResources Needed to Compete Efficiently in Internet RetailingStrong Brand Name and ImageBuild trafficReduce customer perceived riskComplementary MerchandiseOne stop shopping Lower shipping costsAvailability of Customer Information Tailored presentations personalized Why did Internet Retailers Fail?Lack of Skills to Succeed in Internet RetailingConsumers Prefer Multi-Channel Retailers Why did Internet Retailers Fail?They had skills in Web DesignThey had systems to manage transactionThey did not have skills in brand recognitionThey did not have skills necessary to build consumer trustThey did not have skills to build assortments, manage inventory, and fulfill small orders to homesThey did not posses sufficient resources to evolve into multichannel retailers Catalog Retailers are ready for internet retailingReady to take ordersHandling returned merchandiseAble to deliverExtensive information about their customer personalizationDatabase already in placeVisual merchandise same online as in catalog

Why are store-based retailers moving multi-channel retailers?Sales through an electronic channel are growing at over 20% per yearMulti-channel retailers can attract more customers and satisfy existing customers betterThe growth of sales in stores is declining Impact of Internet Shopping on Stores Sales

Which Channel is the most Profitable?Bricks and Mortar, SalespeopleAttracting Customers to StoreDistribution CentersRestocking Returned Merchandise

Building, Refreshing Web SiteAttracting Customers to Web Site: Customer-Acquisition Costs are huge but Customers switching costs are tiny.Picking, Packing, Mailing Small Orders to HomeRestocking Returned MerchandiseStoresElectronic RetailersWill Manufacturers Bypass Retailers and Sell Directly to Consumers?Advantages Retailers have over ManufacturersRetailers sell many brands allowing the customer more varietyRetailers distribute directly to the customer Retailers collect and use Information about Customers

Widespread Disintermediation is unlikely.Issues in Multichannel RetailingIntegrated Shopping ExperienceCommunicate with customers anytime, anywhere through multiple channelsIntergrating legacy systems for seamless customer interfaceBrand ImageMaintain the same image to their customer accros all channelsMerchandise Assortment online and in storePricing Multichannel shopping

Illustration of Multichannel Integration3-49Source: Progressive Grocer, 01 Feb 00; Grocery Headquarters, 01 Feb 00. Consumer does not find desired item in the store.Consumer goes to kiosk to search for product Kiosk links to chains web-site allowing consumers to find and purchase itemConsumer places order online for home delivery or store pick-up at a later time

Opportunities to Enhance online shoppingOrder online, Pick up at storeProduct available in store available on websiteKiosk available in store to order items not available in storeWeb sites features in store deals and coupons/promotionsAd Circular available on website

Shopping in the FutureGreat advantage to have customer database shared by all channels and integrated across all systemsSales associate and store systems able to offer superior customer service based on the databaseTechnology also supports retailers business modelPromises to offer customers products and services which would provide best shopping experience

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