Nonstore Retailing & Electronic Channels Chapter 14 with Duane Weaver.
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Transcript of Nonstore Retailing & Electronic Channels Chapter 14 with Duane Weaver.
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Nonstore Retailing & Electronic Channels
Chapter 14 with Duane Weaver
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Outline
• Nonstore retailing– Catalog– Direct-Selling Org’s (DSO’s)
• Electronic Channels– Market Opp’s– Service Output Provision and Demand-Side Gaps– Channel Flow Performance and Supply-Side Gaps– Coordination Challenges
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Non-Store Retailing: Catalogs
• E.g.: Sears Catalog, Land’s End…• Service Outputs Offered:
– Break bulk– Assortment and variety can vary widely (trend towards
specialty in-depth focused narrower range products)– Smaller Catalogs – more targeted mailings– Ultimate in Spatial Convenience (shop from home, yet
perhaps a delay without expense of overnight delivery)
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Non-Store Retailing: Catalogs• Segments served:
– Time starved working mother– Busy Single parents– People whose time and travel costs to get to a store are expensive– The Housebound– Others?
• Related Costs and Risks:– Reliance on manufacturers if do not produce yourself– Creation of the catalog (size, product coverage, segment
distribution…)– Mailing List – look at lifetime value of mailing list and delete or add
customers– Order Fulfillment – Logistics of picking and packing– Stock-Outs – inventory management vs. delivery delays– Merchandise returns – 6-15% in stores, 35% in catalog sales. Returns
are more expensive to manage (bulk broken) and ship
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Direct-Selling Org’s (DSO’s)
• Direct Selling is “the sale of a consumer product or service in a face to face manner away from a fixed retail location”.
• Typically high reliance on personal selling• E.G.’s: Amway, Mary Kay, Herbal Life, Avon,
and Tupperware.• Top 5 DSO countries - sales (Canada is 10th):
1. Japan2. USA3. Brazil4. Germany5. Korea
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Direct-Selling Org’s (DSO’s)MLM- Multi-level Marketing (MLDSO)
• MLDSO distributors are compensated in three different ways:1. Mark-up on wholesale cost earnings2. MLDSO commission paid per sale3. MLDSO commission on sales made by subordinates (recruits)
• Balance growth of Network vs. Sale of products (often based on personal consumption)
• Ilegal Pyramid Schemes:– Fraudulent mechanisms by which new recruits are required to pay a
nonrefundable fee for becoming a distributor and the distributor’s only reward is this fee (there is no sale and/or consumption of a product or service). Ultimately the last layer of the pyramid will make no money from anyone (population maximized), yet the highest in the pyramid earns money from everyone.
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Electronic Channels
…any channel that involves using the Internet as a means of reaching the end-user or any channel for which the consumer literally buys on-line. B2C or B2B.
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Market Potential for E-Channels
• Restrictive Market – must be able to shop online.
• Strong Growth in some countries –1998 33% of US online, whereas in 2003 56% of US online
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Service Outputs and Demand-Side Gaps in E-Channels
• Positives:– Any time of day or night spatial convenience– More pleasant shopping experience, takes
less time– Price-value promotions for online shopping– Lower prices– Broader access– Consumer Control
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Service Outputs and Demand-Side Gaps in E-Channels
• Negatives:– Product return challenges– Stock availability– Timely delivery (like catalog sales)– Trust and Privacy– Prefer face-to-face shopping
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E-Channel Flow Performance and Supply-Side Gaps
• New Fixed Costs Created– Technical Infrastructure– Warehousing or inventory arrangements– Need for new intermediaries (E-bay, yahoo)
• May reduce costs (EDI integration, VMI, and CRP systems)• Physical Possession – inventory, pick, pack, ship costs increase. 3rd
Party expert business is on the rise as a result (FedEx).• Promotion – impacts on alternative channels such as retail stores• Negotiation – may decrease or increase in intensity• Risking – increased fear about disclosure of financial information online,
reduce risk of holding inventory (ship direct from manufacturer)• Ordering – Technology has improved effectiveness of ordering
dramatically (reducing operating cost and increasing entry cost)• Payment – existence of electronic payment from backing has facilitated
e-commerce growth. Trust issues have induced new 3rd party members like PayPal.
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E-Channel Coordination Challenges
• Creates Dual Channel Conflicts related to Goals, Domain and perception-of-reality.
• Bricks and Mortar in combination with online resellers may exert greater strength in the channel, increasing power conflicts.
• Confusion about online threat results in restrictive channel behaviour precluding channel success (e.g.: mall merchants restricted from online expansion by mall leasor)
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Thank You!