Module-3 (1).docx

**Module 3\ Multichannel Retailing** **MULTICHANNEL RETAILERS** -- are retailers that sell merchandise or services through more than one channel. **Retail Channels** -- is the way a retailer sells and delivers merchandise and services to its customers. The most common channel used by retailers is...

**Module 3\ Multichannel Retailing** **MULTICHANNEL RETAILERS** -- are retailers that sell merchandise or services through more than one channel. **Retail Channels** -- is the way a retailer sells and delivers merchandise and services to its customers. The most common channel used by retailers is a store. The vast majority of sales are made through the store channel, but the catalogue and Internet channels also account for significant sales. - **Internet Channel** -- Internet retailing, also called online retailing, electronic retailing and e-tailing, is a retail channel in which the offering of products and services for sale is communicated to customers over the Internet. Everyone would be doing their shopping over the Internet. Stores would close due to lack of traffic, and paper catalogues would become obsolete. - **Catalogue Channel** -- is a nonstore retail channel in which the retail offering is communicated to customers through a catalogue mailed to customers. The merchandise categories with the greatest catalogue sales are drugs and beauty aids, computers and software, clothing and accessories, furniture and housewares, and books, music and magazines. - **Direct Selling** -- is a retail channel in which salespeople interact with customers face-to-face in a convenient location, either at the customer's home or at work. Direct salespeople demonstrate merchandise benefits and/or explain a service; take an order; and deliver the merchandise. Direct selling is a highly interactive retail channel in which considerable information is conveyed to customers through face-to-face discussions. Two special types of direct selling: - **Party plan system** -- salespeople encourage customers to act as hosts and invite friends or co-workers to a "party". The host or hostess receives a gift or commission for arranging the party. At the party the merchandise is demonstrated and attendees place orders. - **Multilevel system** -- independent business people serve as master distributors, recruiting other people to become distributors in their network. The master distributors either buy merchandise from the firm and resell it their distributors or receive a commission on all merchandise themselves, the master distributors are involved in recruiting and training other distributors. - Some multilevel direct selling firms are illegal pyramid schemes. A **pyramid scheme** develops when the firm and its program are designed to sell merchandise and services to other distributors rather than to end users. The founders and initial distributors in pyramid schemes profit from the inventory bought by later participants, but little merchandise is sold to consumers who use it. - **Television home shopping** -- is a retail channel in which customers watch a television program that demonstrates merchandise and then place orders for that merchandise, usually by telephone, via Internet, or via TV remote. The three forms of TV home shopping retailing are: - **Cable channels** dedicated to television shopping. - **Infomercials** are programs, typically 30 to 60 minutes long that mix entertainment with product demonstrations and then solicit orders placed by telephone. - **Direct-response advertising** consists of one to two-minute advertisements on television and radio that describe products and provide an opportunity for consumers to order them. - **Automated retailing** -- is a retail channel in which merchandise or services are stored in a machine and dispensed to customers when they deposit cash or use a credit card. Automated retailing machines, also known as vending machines, are typically placed at convenient, high traffic locations, such as in workplaces or on university campuses. **BENEFITS OFFERED BY THE RETAIL CHANNELS** - **Store Channel** -- stores offer several benefits to customers that they cannot get when they shop through nonstore channel such as catalogues or the Internet.   - **Touching and feeling Products** -- perhaps the greatest benefit offered by stores is the opportunity for customers to use all five senses -- touching, smelling, tasting, and hearing -- when examining and evaluating products. Although new technologies such as 3D can enhance representations of products on a computer screen. - **Personal service** -- although consumers are often critical of the personal service they get in stores, sales associates still have the unique ability to provide meaningful, personalized information. They can tell customers if a suit looks good on them, suggests and answer questions to customers. - **Risk reduction** -- the opportunity to use all five senses when evaluating products and to get personalized information increases the likelihood that consumers will be satisfied with their purchases. In addition, the physical presence of the store reduces perceived risk and increases customers' confidence that any problems with a purchase will be corrected. - **Immediate Gratification** -- customers can get the merchandise immediately after they buy it from stores. - **Entertainment and Social experience** -- in-store shopping can be a stimulating experience for some people, providing a break in their daily routine and enabling them to interact with friends. - **Browsing** -- shoppers have only a general sense of what they want but don't know the specific item they want. So they go to a store to see what is available before they decide what to buy. - **Cash Payment** -- stores are the only channel through which consumers can make cash payments. Some customers prefer to pay with cash because it is quicker, resolves the transaction immediately, and does not result in potential interest payments or excessive debt. **Catalogue Channel** - **Safety** -- security in malls and shopping areas is becoming an important concern for many shoppers, particularly the elderly. Nonstore retail channels enable customers to review merchandise and place orders from a safe environment -- their home. - **Convenience** -- catalogues offer the convenience of looking at merchandise and placing an order from almost anywhere 24/7. However, catalogues are easier to browse through than websites. **Internet Channel** - **Broader and deeper assortments** -- one benefit of the Internet channel, compared with the other two channels is the vast number of alternatives that consumers can consider. - **More timely information for evaluating merchandise** -- an important service offered to customers is providing information that helps them make better buying decisions. The retail channels differ in terms of how much information customers can access. The information provided through the Internet channel is unlimited. - **Personalization** -- due to the Web's interactive nature, the most significant potential benefit of the Internet channel is its ability to personalize merchandise offerings and information for each customer economically. **Live chats** -- customers can click a button at any time and have an instant messaging e-mail or voice conversation with a customer service representative. **Perceived risk in electronic shopping** -- some consumers are concerned about buying products through an electronic channel. The two critical perceived risks are - The security of credit card transactions on the Internet - Potential privacy violations **BENEFITS OF MULTICHANNEL RETAILING** - Overcoming the Limitations of an Existing Format Increased assortments Low-cost, consistent execution Current information - Increasing Customer Satisfaction and Loyalty - Gaining insights into consumer shopping behaviour - Expanding market presence - Building a strategic advantage **DIFFERENCES BETWEEN SERVICES AND MERCHANDISE RETAILERS** - **Intangibility** - Services are less tangible than products -- customers cannot see or touch them. - They are performances or actions rather than objects - Because services cannot touch and feel services, it is difficult for them to evaluate services before they buy them, or even after they buy and consume them.   - **Simultaneous Production and Consumption** - Products are typically made in a factory, stored and sold by a retailer, and then used by consumers in their homes. - Service providers, however, create and deliver the service as the customer is consuming it. - The simultaneity of production and consumption also creates some special problems for services retailers.   - **Perishability** - Services are perishable. They cannot be saved, stored or resold. - Due to the perishability of services, services retailing must match supply and demand.   **TYPES OF OWNERSHIP** **Independent, Single-store Establishments** - Retailing is one of the few sectors in our economy in which entrepreneurial activity is extensive. - Many retail start-ups are owner-managed, which means management has direct contact with customers and can respond quickly to their needs. - Small retailers are also very flexible and can react quickly to market changes and customer needs.   **Wholesale-sponsored voluntary cooperative group** -- which is an organization operated by a wholesaler offering a merchandising program to small, independent retailers on a voluntary basis.   **Corporate Retail Chains** - It is a company that operates multiple retail units under common ownership and usually has centralized decision making for defining and implementing its strategy. - Retail chains can range in size from a drugstore with two stores to retailers with thousands of stores such as Walmart. **Franchising** - Is a contractual agreement between a franchisor and a franchisee that allows the franchisee to operate a retail outlet using a name and format developed and supported by the franchisor. - In a franchise contract, the franchisee pays a lump sum plus a royalty on all sales for the right to operate a store in a specific location. - The franchisee also agrees to operate the outlet in accordance with procedures prescribed by the franchisor. - The franchisor provides assistance in locating and building the store, developing the products or services sold, training managers, and advertising. - To maintain each franchisee's reputation, the franchisor also makes sure that all outlets provide the same quality of services and products. - The franchise ownership format attempts to combine the advantages of owner-managed business with the efficiencies of centralized decision making in chain store operations.