Retail Management

Part : 02
Situation Chapter-06
Analysis

Web, Nonstore-Based,
and
Other Forms of Nontraditional Retailing

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 Chapter Objectives
 To contrast single-channel and multi-channel retailing.
 To look at the characteristics of the three major retail
institutions involved with nonstore-based strategy mixes:
direct marketing, direct selling, and vending machines – with
an emphasis on direct marketing.
 To explore the emergence of electronic retailing through the
World Wide Web.
 To discuss two other nontraditional forms of retailing: video
kiosks and airport retailing.

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 Approaches to Retailing Channels
 When it begins, a retailer often relies on Single-Channel
Retailing, whereby it sells to consumers through one retail
format. That one format may be store-based (a shoe store)
or nonstore-based (Catalog Retailing, Direct Selling, or Web
Retailing).
 As the firm grows, it may turn to Multi-Channel Retailing,
whereby a retailer sells consumers through multiple retail
formats. Multi-Channel Retailing enables a firm to reach
different customer groups, share costs among various
formats, and diversify its supplier base.
 Retail leader Wal-Mart sells through stores (including Wal-
Mart stores, and Sam’s Club) and a Website (www.
walmart.com).

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 Approaches to Retailing Channels

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 Approaches to Retailing Channels

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 Nonstore Retailing
 Nonstore Retailing : Retailers (Single-Channel or Multi-
Channel) engage in Nonstore Retailing, which is the retailing
strategy that is not store-based.
 US nonstore retailing sales exceed $375 billion annually, 80%
comes from Direct Marketing.
 The fastest growing form of Direct Marketing involves
Electronic (Web-Based) Retailing.

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 Non-store Retailing

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 Nontraditional Retailing
 Nontraditional retailing also includes formats that do not fit
into the store and nonstore-based categories, like the
followings:
 Video Kiosks
 Airport Retailing

 Sometimes they are store-based; other times they are not.

What they have in common is their departure from traditional
retailing strategies.

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 Non-store Retailing
A) Direct Marketing
 Direct marketers can use a number of channels to reach
individuals prospects and customers.

a. Direct Mail
b. Catalog Marketing
c. Telemarketing
d. TV and other Direct-Response Media, or Radio

 The Direct Marketing leaders are USA, Japan, German, Great

Britain, France, and Italy.

 Popular products are gift items, apparel, magazines, books

and music, sports equipment, home accessories, food, and
insurance.

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 Non-store Retailing
A) Direct Marketing
 Direct Marketers can be divided into two broad categories :
General and Specialty.
 General Direct Marketers : They offer a full line of products
and sell everything from clothing to housewares. Example is
J.C. Penney.
 Specialty Direct Marketers : They focus on more narrow
product lines. Example is L.L. Bean.

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 Non-store Retailing
A) Direct Marketing Tools
a. Direct Mail : It involves sending an offer, announcement,
reminder or other item to a person like letters, flyers etc.
b. Catalog Marketing : The retailers send full-line merchandise
catalogs, specialty consumer catalogs and business catalogs
in print form, CDs, videos or online.
c. Telemarketing : It is the use of the telephone calls initiated
by the retailer.

d. TV and other Direct-Response Media, or Radio : TV Retailing

has two components : Shopping Networks and Infomercials.

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 Non-store Retailing
A) Direct Marketing Tools
i. Shopping Networks : On a shopping network, the
programming focuses on merchandise presentations and
their sales (usually by phone). Example : HSN (Home
Shopping Network).
ii. Infomercials : An Infomercial is a program-length TV
commercial (typically 30 minutes) for a specific good or
service that airs on television. Example : Real Estate
Infomercials.

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 Non-store Retailing
A) Direct Marketing

Telemarketing Direct Mail

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 Non-store Retailing
A) Direct Marketing

Metro-Catalogues

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 Direct Marketing-Advantages
i. Reduced costs
ii. Lower prices
iii. Large geographic coverage
iv. Convenient to customers
v. Ability to pinpoint customer segments through targeted
mailings
vi. Ability to eliminate sales tax
vii. Ability to supplement regular business without additional
outlets

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 Direct Marketing-Disadvantages
i. Products cannot be examined prior to purchase.
ii. Costs may be underestimated. Catalogs can be expensive. A
computer system is required to track shipments, monitor
purchases and returns, and keep mailing lists current. A 24-
hour phone staff may be needed.
iii. Response rates to catalogs under 10%.
iv. Clutter exists. Each year billions of catalogs are mailed in US
alone.
v. Industry reputation sometimes negative due to delivery delays
and shoddy (inferior quality) goods.

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 Non-store Retailing
A) Direct Marketing
Customer Data-Base
 Because direct marketers initiate contact with customers (in
contrast to store shopping trips initiated by the consumer),
it is imperative that they develop and maintain a
comprehensive data base.
 With comprehensive data base, direct marketers can
pinpoint their best customers, make offers aimed at specific
customer needs, avoid costly mailings to non-responsive
shoppers, and track sales by customer.
 A good data base is the major asset of most direct markets,
and every thriving direct marketer has a strong data base.

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 Non-store Retailing
A) Direct Marketing
Data-Base Retailing
 Data Retailing is a way to collect, store, and use relevant
information about customers. Such information typically
includes a person’s name, address, background data,
shopping interests, and purchase behavior.
 Though data bases are often compiled through large
computerized information systems, they may also be used
by small firms that are not overly computerized.

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 Non-store Retailing
B) Direct Selling
 Direct Selling includes personal (face-to-face) contact with
consumers.
 Cosmetics, jewelry, vitamins, household goods and services,
such as carpet cleaning, vacuum cleaners, and magazines and
newspapers are among the items sometimes sold in this way.
 Examples : Among the leading direct sellers are Avon
(cosmetics), Amway (household supplies), Kirby (vacuum
cleaners) etc.
 Some stores, such as J.C. Penney also use direct selling. J.C.
Penney’s decorator consultants sell a complete line of
furnishings, not available in its stores, to consumers in their
homes.
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 Non-store Retailing
B) Direct Selling

Avon Amway
Cosmetics Home and Personal Care

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 Direct Selling-Advantages
 The Direct Selling strategy mix emphasizes convenient shopping
and a personal touch, and detailed demonstrations can be
made.
 Consumers often relax more in their homes than in stores.
 For some shoppers, such as older consumers and those with
young children, in-store shopping is hard due to limited
mobility.
 For the retailer, direct selling has lower overhead costs because
stores and fixtures are not necessary.

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 Direct Selling-Disadvantages
 More women work, and they may not be interested in or
available for in-home selling.
 A firm’s market coverage is limited by the size of its sales force.
 Sales productivity is low, since the average transaction is small
and most consumers are unreceptive.
 Sales force turnover is high.

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 Non-store Retailing
C) Vending Machines
 A Vending Machine is a cash-or card-operated retailing format
that dispenses goods (such as beverages) and services (such as
electronic arcade games).
 It eliminates the use of sales personnel and allows 24-hour
sales.
 Machines can be placed wherever convenient for consumers-
inside or outside stores, in motel corridors, at train stations, or
on street corners.
 To improve productivity and customer relations, vending
operators are applying several innovations; like french fries are
being made fresh in vending machines.
 Machine malfunctions are reduced by applying electronic
mechanisms to cash-handling controls.

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 Non-store Retailing
C) Vending Machines
 Operators must still deal with theft, vandalism, stock-outs,
above-average prices, and the perception that vending
machines should be patronized only when a fill-in convenience
item is needed.

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 Non-store Retailing
D) Electronic Retailing (Web Retailing)
 The Internet is a global electronic superhighway of computer
networks that use a common protocol and that are linked by
telecommunications lines and satellite.
 The World Wide Web is one way to access information on the
internet, whereby people work with easy-to-use Web Addresses
(sites) and pages.
 Both Internet and World Wide Web convey the same central
theme : Online Interactive Retailing.

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 The Role of the Web in Retailing
 From the vantage point of the retailer, the World Wide Web
can serve one or more roles :
 Project a retail presence and enhance retailer’s image.
 Generate sales.
 Reach geographically-dispersed customers, including foreign
ones.
 Provide information to customers.
 Promote new products.
 Demonstrate new product benefits.
 Provide customer service (e.g., e-mail).
 Conduct a retail business in a cost-efficient manner.
 Obtain customer feedback.

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 Web-Based Retail Sales Projections (US)

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 Web-Based Retail Sales Projections (US)
 A real milestone in Web retailing was achieved just a few
years ago, when for the first time-the majority of US E-tailers
reported a profit.
 Despite the foregoing data, the Web accounts for only 3-4%
of US retail sales.
 The Web Retailing will not be the death knell of store-based
retailing but another choice for shoppers.

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 Reasons NOT to Shop Online
 Lacking information of Web Address
 Trust
 Fear
 Lack of security
 Lack of personal communication

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 Recommendations for Web Retailers
 Develop or exploit a well-known, trustworthy retailer name.
 Tailor the product assortment for Web shoppers, and keep
freshening the offerings.
 With download speed in mind, provide pictures and ample
product information.
 Enable the shopper to click as little as possible.
 Provide a solid search engine.
 Capitalize on customer information and relationships.
 Offer online order tracking.
 Prominently state the firm’s return and privacy policies.
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 Examples of Web Retailing
 Amazon.com (www.amazon.com) is probably the most famous
pure Web retailer in the world.
 Netflix (www.netflix.com) is a very successful online service
retailer (world’s largest online DVD movie rental service) . It
rents DVDs in a customer-friendly way.
 eBay (www.ebay.com)

 Note : There are millions of websites worldwide and hundreds

of thousands in retailing.

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 Other Nontraditional Forms of Retailing
 Two other nontraditional institutions merit discussion :
i. Video Kiosks
ii. Airport Retailing
 Although both formats have existed for years, they are now
much more noteworthy.

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 Other Nontraditional Forms of Retailing
i. Video Kiosks
 Video Kiosks : The Video Kiosk is a freestanding, interactive,
electronic computer terminal that displays products and
related information on a video screen; it often has a
touchscreen for consumers to make selections.
 Some kiosks are located in store to enhance customer
service; others let consumers place orders, complete
transactions (typically with a credit card), and arrange for
shopping.
 Kiosks can be linked to retailers’ computer networks or to the
web.
 Video Kiosks can be placed almost everywhere (from a store
aisle to the lobby of a college dormitory to a hotel lobby),
require few employees, and are an entertaining and easy
way to shop.
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 Other Nontraditional Forms of Retailing
i. Video Kiosks

Best Buy is partnering with ZoomSystems,

a San Francisco-based vending
machine company, for the project
that will install the
small automated stores (Video Kiosks)
at eight airports.

The machines will stock cell phone

and computer accessories,
along with digital cameras,
portable data storage devices,
headphones, travel adapters,
electronic chargers
and other gadgets.

The video kiosks will be installed in

Atlanta, Boston, Dallas,
Houston, Las Vegas, Los Angeles,
Minneapolis and San Francisco. 

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 Other Nontraditional Forms of Retailing
ii. Airport Retailing
 In the past, the leading airport retailers were fast-food
outlets, tiny gift stores, and newspaper/magazine stands.
 Today, airports are a major centre of retailing.
 At virtually every large airport, as well as at many medium
ones, there are full-blown shopping areas.
 Most small airports have at-least a fast-food retailer and
vending machines for newspapers, candy, and so forth.

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 Other Nontraditional Forms of Retailing
ii. Airport Retailing

Duty Free Shopping

Dubai Airport

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 Other Nontraditional Forms of Retailing
ii. Airport Retailing

Borders Bookstore
At Orlando Airport in Florida-USA
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 Features of Airport Retailing
 There are some of the distinctive features of airport retailing.
 Large group of prospective shoppers.
 Captive audience at airport looking to fill their waiting time. They
tend to have above-average incomes.
 Strong sales per square foot of retail space.
 Rent is higher for airport retailers.
 Strong sales of gift and travel items.
 Difficulty in replenishment, because airports are physically
removed from delivery areas and space is limited.
 Longer operating hours.
 Duty-free shopping is possible.

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 Activity

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