The Impact of Nonstore and Nontraditional Retailing

• Methods
• Pros and Cons
• Impact of Internet?
• Consumer Preferences
• Problems and Fears
• Database Development

First, what is Nonstore Retailing?

• Typically, the main issue is that all or part of the retailing activities take place outside of a physical store setting
• Retailers, like Lands’ End, can simply use catalog and web information, with ordering by phone, mail, or email - no physical location for customer sales
• Others, like Wal-Mart, can develop a web site that is synchronized to work with the physical store setting
• Finally, online retailers like Amazon.com have no physical site, but have partnered with many other retailers who do have onsite stores

• Careful!  Many stores use multiple methods!!! Must match their target consumers
• Multichannel retailing: multiple methods of reaching the customer
• Nonstore options: Eliminates sales personnel, provides 24 hour access, efficient resource use
• What are the tradeoffs?  Costs and benefits?
• ADA issues:  is access improved or reduced?
• Benefits, customs, requirements of direct marketing differ as we go to different cultures

Direct Marketing

• Customers are exposed to goods and/or services through nonpersonal sources like direct mail, TV
• Customers place ORDERs through nonpersonal sources – phone, fax, email, etc.
• How?  Which medium or combination of media are preferred?
• Relies on database marketing:  80/20 rule
• Can we identify the 20% that make 80% of sales?
• Characteristics:  married, upper middle class, 36 to 50 years of age or older
• Particular form is generally related to type of desired convenience (e.g. stores are too far, access is difficult for elderly or handicapped)

Database Marketing

• Direct marketing is based on your ability to develop a detailed knowledge and ongoing customer contact
• This helps the retailer to target their efforts to consumers who are likely prospects
• Definition:  Database retailing is a way of collecting, storing, and using relevant information on customers.
• Typically include names, addresses, background information, shopping interests, purchase behavior (items, frequency, preferences)

Media Selection

• Printed catalogs
• Direct-mail ads and brochures
• Inserts with monthly credit card and other bills (statement stuffers)
• Freestanding displays
• Ads or programs in mass media
• Banner ads or hot links on the Web
• Video kiosks

Outcome Measures

• Overall Response Rate
• Effectiveness of each method?
• Does one support the other?
• Average Purchase Amount
• Sales Volume by Product Category
• How many catalogs does the average consumer receive per day, per week?
• Clutter, Information overload?

Characteristics

• That direct marketers are either general (full-line like JC Penney) or Specialty (LL Bean)
• Does this classification give us the contrasts that we need?
• What might we add?
• What are the advantages of direct marketing?  Consider the costs that are reduced.
• Disadvantages?  Clutter, costs, delays in delivery, products may be returned

An Important Definition What is Convenience?

• There are several types - you are reducing the use of some valued resource
• Time convenience - reducing the time spent
• Information convenience - reducing the need to process complex information
• Money convenience - reducing extra expenses
• Energy convenience - reducing the work that has to be done
• Space convenience - reducing the amount of travel

The Changing Face of Direct Selling

• This is personal contact with consumers in their homes, phone contacts
• In the 1950’s - 1970’s, direct sales of items like Tupperware food containers occurred in the home through “parties”
• Personal sales to the individual (Avon cosmetics)
• Consumers have changed!  What should such firms do to maintain their customer base?
• Who is at home for the Avon lady?  Who has time for a Tupperware party?
• Avon:  sales in the workplace

What Can We Say about Vending Machines?

• You probably use vending machines everyday - have you ever thought about…
• What should be in them?  What shouldn’t be in them?
• Where should they be located?
• How much people will pay for a product in a vending machine
• Quality of items in vending
• What type of payment (size of currency, credit cards, tokens) should be accepted

Web Use is Related to Strategy and Retail Consistency

• A retailer should not post a web site just because it is a trend. A hastily constructed or poorly-maintained web site makes an unfavorable impression.
• The retailer must have thoroughly considered the role of the Web in meeting their mission, achieving their objectives, matching the desires of their consumers defined via their their target market, providing the synchronization of company, in-store location (if any exists), company image, desired level of customer service, the establishment of a workable database, and the timely maintenance of the site.

Website development for retailers

• Look at the characteristics of web shoppers – it is changing as new users emerge – need to keep updated via current studies
• It is changing and growing - need to update your information on who is on the web
• Costs can be controlled
• Creation of communities through chat rooms, clubs, informational exchanges
• What will be the retail assortment online?
• Width - how many lines can you carry, ship, provide, etc.
• Depth - how many choices can you carry, ship, provide, etc?

Web-Based U.S. Retail Sales - statistics
 

Characteristics of web users

• Male and female users
• Growth in elderly users
• Annual income of at least $50,000 make up 2/3 of all web users
• Reasons for use:  utilitarian and hedonic
• Childers Journal of Retailing article
• Usefulness, ease of use, enjoyment

Analysis of Web Strategy

• Choose a web site
• Gather background information
• What would the typical customer want to do?
• Does the site allow that consumer behavior?
• What info should the company want?
• What are the signals of good practice?

What are recommendations for effective web sites
1.  Does it match the store (manufacturer's) image?  Does it match the tastes of the target market?
2.  What is the company trying to accomplish with its Web site?  Purchasing?  Merchandise research by customers?
3.  Is the company web site convenient for consumers?  What web navigation skills are assumed?
4.  Does the web site's information match what the target consumers want?  Is it too trendy? Too full of the latest web craze?
5.  Does the web site allow the customer to ask for help?  Will any question or complaint be answered?  Check it out with a legitimate question.
6.  Is the site synchronized with any in-store locations?  e.g. are there coupons on the web that match the store?
 

More Issues to Consider
7.  Are the goods and services on the web the same as those in the store?  Vice versa?  If not, will the customer be annoyed?
8.  Are all the web links operational?  Is the information current?  How long to load pages? All browsers?
9.  What purchase methods are offered? Do these match what the consumer wants?
10.  Does the web site add benefits that customers want?
11.  What search engines will list your site?
12.  How is the web site promoted?  How can customers learn about it?
13.  Does the web site allow the retailer to gather useful customer data?
14.  What indicators of privacy are there?
 

TERM PROJECT Best Practices of Online Retailers:  
 

• This assignment is designed to give you skills in evaluating retailers using e-commerce to reach, inform, and sell to consumers.
• Here is your job: You and your consulting team have been selected to develop a set of “Best Practices” for a specific industry.
•  In order to do so, you will read background literature that provides some existing benchmarks used in from the industry’s point of view as well as the consumers’ points of view.
• You will propose a set of benchmarks that are most relevant to your industry.
•  You will then examine a sample of retail online sites, analyzing and scoring them on those web characteristics that you have chosen.
• You will then present your findings, the ranking of each retailers, and recommendations for the future.