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I. Non-store Versus Store-based Retailers

‡ While only 10% of retail sales

are made through non-store
channels, sales in non-store
formats are growing faster
than store sales.
‡ Non-store retailing is a form
of retailing in which sales are
made to consumers without
using stores.
I. Non-store Versus Store-based Retailers
The various types of non-store retailers are defined in
terms of the medium they are using to communicate
with customers:
‡ Electronic retailers use an interactive computer or
computer-like interface to communicate with customers.
‡ Catalog and direct mail retailers communicate using
printed material.
‡ Direct selling retailers communicate with customers
through a personal, face-to-face contact by a
salesperson.
‡ TV home shopping retailers use television.
‡ Vending machine retailers have limited
communications through the display of
the merchandise in the machine.
 I. Non-store Versus Store-based Retailers
( The nature of the communications between the
retailer and its customers differs for the various
non-store retailing formats.

( The communications in direct selling are highly

interactive.

( Electronic retailing has the potential for

providing this same high level of interactivity.

( On the other hand, the communications in TV

home shopping, vending machine, and catalog
retailing are not very interactive.
I. Non-store Versus Store-based Retailers
‡ Most non-store retailers offer
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 ¢



¢ 
 ¢
 and purchasing merchandise
at a 
 ¢
  
¢ 
.

‡ Frequently consumers are
  

  

¢ provided
by store-based retailers including that
 ¢

 ¢ 
  
¢ 
try it on, attend sessions
on how to use it, or have it altered prior
to purchase.
 II. Electronic Retailing
Electronic retailing is a retail format in
which the retailer and customer
communicate with each other through
an interactive electronic network.

‡ After an electronic dialog between the retailer and

customer, the customer can order merchandise directly
through the interactive network or by telephone and the
merchandise is typically delivered to the customer¶s home.
 II. Electronic Retailing
A. Factors Affecting the Growth of Electronic Retailing
‡ Electronic retailing is less than 1% of retail sales in the
U.S. and even less in Europe and Asia. However, the
annual growth of U.S. electronic retail sales is over
100%. If this growth rate continues, electronic retailing
will have a major impact on the retail industry
significantly decreasing retail sales in stores.
‡ Three critical factors affecting the adoption of a new
innovation such as shopping electronically are:
1. The environment where customers can try the
innovation
2. The perceived risks in adopting the innovation
3. The benefits offered by innovation compared to the
present alternatives.
 II. Electronic Retailing (Cont.)
1. Trying Out Electronic Shopping

Women now comprise slightly less than half of

Internet users, which is important for the electronic
retailer because women do most of the shopping.
‡ The substantial Internet usage by Generation Y
suggest a bright future for electronic shopping retailing.
II. Electronic Retailing (Cont.)
2. Perceived Risks in Electronic Retailing
A critical concern of consumers is that
credit card transactions are not secure
when shopping on the Internet.
A perception of risk is diminishing as
credit card companies promote the use
of their cards on the Internet and
inform customers that the customers
will not be responsible for security
lapses.
 II. Electronic Retailing (Cont.)
Issues about Shopping on the Internet
1. Entertainment and Social Experiences
2. Safety
3. Ordering and Getting Merchandise
4. Number of Alternative
5. Assistance in Screening Alternatives
6. Providing Information to Evaluate Merchandise
7. Cost of Merchandise
Electronic retailing sales will grow only if the format
offers consumers advantages over the existing retail
formats.
 II. Electronic Retailing (Cont.)
1. Entertainment and Social Experiences
‡ In-store shopping can be a stimulating
experience for some people, providing a
break in their daily routine and enabling
consumers to interact with friends.
‡ All non-store retail formats are limited in the
degree to which they can satisfy these
entertainment and social needs.
II. Electronic Retailing (Cont.)
2. Safety
‡ Non-store retail formats have an advantage
over store-based retailers by enabling
customers to review merchandise and place
orders from a safe environment-their homes
 II. Electronic Retailing (Cont.)
3. Ordering and Getting Merchandise
‡ Electronic retailing, like most non-store retail
formats, enables consumer to order
merchandise from any location at any time of
the day. However, consumers usually have
to wait several days to get the merchandise.
Thus, all non-store retailers suffer in
comparison to stores on this dimension.
‡ The importance of getting merchandise
immediately to customers depends on
the type of buying situation and
merchandise.
 II. Electronic Retailing (Cont.)
4. Number of Alternative
‡ A person living in Columbus, Ohio can shop
electronically at Harold's in London in less time
that it takes to visit the local supermarket.
‡ Having a lot more alternatives to consider might
not be that much of a benefit. While it is easy to
go from one web sight to another, finding what
you want is not so easy because each
web site has a different interface which
customers have to learn to get the
information they want.
 II. Electronic Retailing (Cont.)
6. Providing Information to Evaluate Merchandise
‡ Retailers vary in the sheer amount of information
provided about the merchandise they offer.
Store-based retailers also are different in the
information they make available to consumers.
‡ Specialty and department stores typically have
trained and knowledgeable sales associates, while
many discount stores do not.
‡ Electronic retailers have greater
opportunities to provide information to
their customers than specialty and
department store retailers.
 II. Electronic Retailing (Cont.)
7. Cost of Merchandise
‡ Some experts suggest that electronic retailers will
have much lower costs than in-store retailers
because electronic retailers do not have to spend
money building and operating stores at convenient
locations.
‡ However, electronic retailers, or their customers,
will have higher costs of delivering small
quantities of merchandise to homes,
as well as dealing with the high level
of return, and attracting customers to
their websites.
 II. Electronic Retailing
C. What Type of Merchandise Will be Sold
Effectively by Electronic Retailers?
‡ In addition to the amount and presentation of information,
retail formats also differed in the type of information they can
present effectively. For instance, when purchasing apparel,
some critical information might be ³look and see´ attributes
like color and style, as well as ³touch and feel attributes´ like
how the apparel fits.
‡ Based on the difficulty of providing ³touch and feel´
information through non-store channels, one might conclude
that non-store retailers will not be able to successfully sell
merchandise with more important ³touch and feel´ attributes
like clothing, perfume,flowers, and food. However, this type
of merchandise is presently sold by non-store retailers.
 II. Electronic Retailing
C. What Type of Merchandise Will be Sold
Effectively by Electronic Retailers? (Cont.)
‡ Branding overcomes many of the uncertainties in
purchasing merchandise without touching and feeling it.
‡ In some situations, the electronic retailer might even be
able to provide superior information compared to store
retailers.
‡ In other situations, ³touch and feel´ information might be
important, but the information in a store is not much
better than the information provided by an electronic
retailers.
 II. Electronic Retailing
C. What Type of Merchandise Will be Sold
Effectively by Electronic Retailers? (Cont.)
‡ Some services retailers have been very successful
over the Internet, because their ³look and see´
offering can be presented very effectively over the
Internet.
‡ The critical issue determining what types of
merchandise can be sold successfully by electronic
retailers is whether the electronic retailer can
provide enough information appropriate to the
purchase to make sure customers will be satisfied
with the merchandise once they get it.
 II. Electronic
Retailing (Cont.)
D. Will Electronic Retailing Lead to More Price
Competition?
‡ With electronic retailing, consumers can search for
merchandise across the Internet at a low cost. The
number of stores that a consumer can visit and compare
prices is not limited by physical distance.

‡ To limit price comparisons, presently HIS retailers make

it difficult for customers to go from one Internet site to
another.
 II. Electronic
Retailing (Cont.)
D. Will Electronic Retailing lead to More price Competition?
(Cont.)
‡ Thus by making these comparison difficult, electronic
retailers are limiting attractiveness and growth of the
format. However, consumers eventually will insist on
making these comparisons and will reward electronic
retailers that offer this service by going to their sites.
‡ While consumer shopping electronically can collect price
information with little effort, they can also get a lot of
other information about the quality and performance of
products at a low cost.
 II. Electronic Retailing
(Cont.)
E. Keys to Success in Electronic Retailing
Some critical resources needed to successfully
sell merchandise electronically are (1) strong
brand name and image, (2) customer information,
(3) complementary merchandise and services,
(4) unique merchandise, (5) the ability to
effectively present information on the web pages,
and (6) a distribution system to efficiently ship
merchandise to homes and receive returns.
III. Catalog and Direct Mail Retailing
‡ Catalog retailing is a non-store retail format in which the
retail offering is communicated to a customer through a
catalog, while direct mail retailers communicate with their
customers using letters and brochures.
‡ Historically, catalog and direct mail retailing was most
successful with rural consumers, who lacked ready
access to retail stores. With the rise of dual-income
families and other people with limited time for shopping in
stores, catalog retailing has grown in popularity and now
appeals to a broad cross section of consumers.
‡ Some merchandise categories experiencing higher than
average growth include apparel, hosiery, computer
hardware and software, gifts, and pharmaceuticals and
vitamins. Cosmetics, books food, etc. had lower, than
average growth.
III. Catalog and Direct Mail Retailing (Cont.)
A. Types of Catalog and Direct Mail Retailers
‡ Two types of firms sell products through the mail
(1) general merchandise and specialty catalog
retailers and (2) direct mail retailers.
1. General merchandise catalog retailers
offer a broader variety of merchandise in
catalogs that are periodically mailed to their
customers,
2. Specialty catalog retailers focus on specific
categories of merchandise.
III. Catalog and Direct Mail Retailing (Cont.)
A. Types of Catalog and Direct Mail Retailers (Cont.)
‡ Direct mail retailers typically mail brochures and
pamphlets to sell a specified product or service to
customers at one point in time.
In addition to the focus on a specific product or
service, most direct mail retailers are primarily
interested in making a single sale from a specific
mailing, while catalog retailers typically maintain
relationships with customers over time.
About two-thirds of the sales are for
merchandise and one-third are for
services.
III. Catalog and Direct Mail Retailing (Cont.)
B. Issues in Catalog Retailing
‡ Direct mail and catalog retailing are attractive
business opportunities because the start-up
costs are relatively low.
‡ On the other hand, mailing and printing costs
of catalogs are high, and it is increasingly hard
to capture consumers¶ attention as the receive
more catalogs each year.
‡ The length of time required to design, develop,
and distribute catalogs makes it difficult for
catalog and direct-mail retailers to respond
quickly to new trends and fashions.
 IV. Other Methods
Direct selling is a retail format in which a salesperson,
frequently an independent distributor, contacts a
customer directly in a convenient location, either at
the customer¶s home or work, and demonstrates
merchandise benefits, takes an order, and delivers
the merchandise to the customer. Special types of
direct selling include party plan systems and
multilevel networks.
 IV. Other Methods (Cont.)
Television home shopping is a retail format in
which customers watch a TV program
demonstrating merchandise and then place
orders for the merchandise by telephone.
The 3 forms of TV shopping are (1) cable
channels dedicated to home shopping, (2)
infomercials, and (3)direct response
advertising shows on broadcast and cable
TV.
 IV. Other Methods (Cont.)
Vending Machine retailing is a non-store format in
which merchandise or services are stored in a
machine and dispensed to customs when they
deposit cash or use a credit card. Technological
developments in the design of vending machines
may result in long-terms sales growth. New
video kiosk vending machines enable consumers
to see the merchandise in use and have more
information about the merchandise and use their
credit cards to make a purchase.