Retail to e-tail –The evolutionary patterns and perspectives

Vinod UrathGuruvayurappan Institute of

ManagementCoimbatore

Meaning

Retailing is referred to as the physical process of attaining the place utility for the comfort and timeliness of the final customer

by arranging the physical infrastructure for the easy

availability of the items sought for.

A traditional retail format –what?

• is defined in modern times as a brick and mortar retail system, in the retailing term .

Traditional Trade

Traditional Trade

• is defined as all that trade that flows through traditional outlets, such as kiosks,

• corner shops, local mom and pop shops, open markets, etc. It represents all trade with the

• exception of that which flows through retail chains, supermarkets, or super stores

• Traditional trade is characterized by a large complex network• of independently owned retailers and distributors carrying• primarily local or regional brands.

• Key Characteristics • Traditional Trade Categories• Food and Beverages• Clothing and Textile• Consumer Durables• Jewelry and Watches• Home Décor and Furnishing• Personal Care• Footwear• Books, Music and Gifts• 3

• exception of that which flows through retail chains, supermarkets, or super stores

• Definition of Traditional Trad

TRADITIONAL FORMATS DEPENDS ON

• These were dependent on two important factors as

• 1. Intimacy with the customer

• 2. geographical proximity

Evolutionary view of retailing• Traditional formats: a) Brick and Mortar—• -1.kiranas, • 2.mom and pop • To SUPERMARKETS AND EVEN MALLS WHICH ARE larger,

bigger formats.

• BUT IT AGAIN EVOLVED INTO • b) cataloguing- to reach directly the final customer -

Cataloguing:

• Cataloguing: • where in the customers are reached through

mails with telephone numbers of the producer and /or nearest outlets of his being informed about /marked,.

• the manufacturer sends a well designed product brochure giving maximum information/demos and such in a manner which makes it attractive and easily understandable.

Web the game changer

• -the catalogues were very APT in the sense that it also got built in mechanism of order placement and a payment. Additionally this is done in the comforts of the home..

• AND This system seems to go well until the discovery of web..

By the advent of internet

• Virtual market places started to come to the limelight

With advent of internet ,cataloguing also evolved

• Cataloguing evolved into:• a) virtual cataloguing: To reach the customer

thro web pages which acts as the catalogue with multiple pages..

• The web era had transformed the traditional catalogues to more web adaptable forms and thus the web pages itself had started to act as the catalogue pages. But the question all along was-Is it that it is just the same in functionality as the traditional catalogue?.

The virtual catalogue:

• Wherein its advantage was that it afforded larger no: of pages than a conventional catalogue

• Later it got evolved into one which uses the possibilities of the medium

• For Ex: videos to show demos, or animations etc..

The positives and negatives of traditional retail over virtual one

• Shopping experience• Personal info not in public domain

• Negatives:• Timely info and quick dissemination of

information not possible• Needed in some product types where product

gets outdated fast or perishes

• At a basic level, any commercial transaction that involves a direct sale to a consumer at any point of time may be termed as retailing. It can be the selling of apparel, books, music, footwear, grocery items or other things. Such a retail trade could take place in a shopping mall, a mom-and-pop store, a department store, or in a friendly neighborhood grocery shop. Most of such retail trades that can be done through the brick-and-mortar retailing route can be successfully replicated over the Internet as well. In the traditional sense, the term Retailing referred to the final transaction between a business and a customer (B2C).

Other business models include:

Business-to-business (B2B) – These remain the largest source of commercial transactions (about 80% of all transactions).

Consumer-to-business (C2B) – This is an emerging sector. A good example of the consumer-to-business model is “Priceline”

Consumer-to-consumer (C2C) - This model relies on various online communities. A prominent and hugely successful example of the consumer-to-consumer model is “eBay”.

The C2B and C2C sectors are recent phenomena that have emerged taking full advantage of the various electronic media to evolve into potentially major sectors within the retail industry. Earlier, the two sectors played a minimal role in the retail industry but they are gaining momentum with a concurrent rise in the electronic commerce around the world.

Another evolution-Multi channel retail• Multichannel retailing: meanings• “Multichannel retailing” has been used to indicate both:

• 1. the existence of different store formats offering different• retail services

• 2. the existence and growing importance of retail companies• managing different store formats

• Ie, existence of many differentiated retail• products - store formats and the service they provide –

• offering consumers alternative ways to fulfil their• procurement needs

• … and e-commerce is just one of them• 4

• (Multichannel retailing: meanings)• Like in most other industries, the industrialisation of retailing• started with one successful and undifferentiated product on which• to build up economies of scale• The supermarket as the “Ford T” of retailing• Price competition led to innovation and product differentiation• Superstore, hypermarket, convenience store, hard and soft• discount, supercentre, wholesale club, e-commerce ...• Innovation followed different paths in different countries but it has• spread across borders: a variety of retail products coexists• everywhere• The emergence of multichannel retailing and of companies• managing different store formats

• Buying behaviour• Store formats offer consumers different bundles of service• attributes at different prices• “Utility of time and place” differentiated by store format• Like for most other goods and services, consumers buy more than• one type of retail service• Consumers buy the same goods from different store formats• The proportion of total expenditure going to different store formats• depend on the characteristics of households and the occasions in• which they shop• Retailers position both their trade names and store formats

yet Another evolution-multi channel Retailing to cross-shopping/cross-retailing

• Is from multi channel retailing/shopping to cross shopping

• Multi channel retailing is the process of putting up multiple channel formats for the sale of same type of goods.

• A traditional multi channel could be as follows.• As an example a shoe manufacturer can sell his wares

in multi brand ,company brand showroom ,or through direct marketing using different medias…

Multi channel in raw form meant basically price competition

• Multi channel retail in its raw traditional , non virtual form was not considered an

integrated selling operation since this was not a seamless retailing for the consumers.

Seamlessness happens when one channel is acting as a helpful tool for the customer even when he finally purchases thro some other channel

Cross channel retailing/shopping:

• Cross channel shopping Is the shopping through multiple channels which provides seamlessness..

• ie; using more than one channel for the purchase of a product in such a way that in this case the usage of the medium for better knowledge acquisition and processing takes more importance over any other aspect.

Main feature of cross shopping in comparison with multi channel one

• Cross shopping happens by way of comparisons ,price quotes, feature ,warranty comparisons etc ..which is seen as different at least in some type of product segments when purchased thro different channels..

• An Example of it is -seen in Airline ticketing

Main feature of cross shopping in comparison with multi channel one

• Also This cross shopping had its impact in cross channel retailing --

• by also promoting sites which gives expert advises, previews ,enabling the internet savvy customer to compare and thus help give a seamless integration happen..

• also this helps to learn more in the privacy of himself and take a well thought out decision.

Because of all this ,Studies show that

• a)Large Penetration of web enabled cross shopping is happening

• The number of cross channel shoppers increased 8% between 2004 -2005,with some 40 million or 55% of online consumers cross shopping certain selected products.

• cross channel shoppers spent an average of $458 over 3 months on products researched online and bought offline.

• b) Profile:• Cross channel shoppers tended to be wealthier,

younger and more experienced (kerner, 2004).They tended to have more discretionary income and spend more and be more engaged with brands (WSJ 2004)

• cross channel shoppers were more inclined to buy online than single channel shoppers. thus the online adoption was 75% more than single channel shoppers(kerner 2004).

e-tailing or e-retailing• e-tailing or e-retailing refers to the selling of retail goods electronically over the Internet. • The term is a short form for "electronic retailing", and surfaced in the 1990s for being

frequently used over the Internet. The term is an inevitable addition to other similar terms such as e-business, e-mail, and e-commerce.

• E-tailing usually refers to the business-to-consumer (B2C) transactions.

e-tailing offers the consumers huge amounts of information in the form of web sites with useful links to similar sites that allows consumers to compare products by looking at individual items. The convenience of online shopping is unmatched indeed. Shopping out of your home or office reduces the stresses of waiting in lines and dealing with irritating sales people. However, E-tailing causes problems with fit, since the consumer cannot try the items on. Return policies may also act as turn offs and items can be difficult to return. The shipping and handling costs may turn the customers away. e-tailing requires technology savvy customers and this puts a limit on its potential reach. We can see that E-tailing is emerging as an interesting phenomenon in the retail industry that is on a rise despite the disadvantages associated with it.

• E-tailing is gaining ground. In the year 2009, clothing and apparel segment clocked online revenues to the tune of $ 19.5 billion. Online retailing is classified into three main categories:

1. Click – The businesses that operate only through the online channel fall into this category. Prominent examples in this category include: Dell, Amazon.com and e-Bay.

2. Click and Brick – The businesses that use both the online as well as the offline channel fall into this category. Common example includes: Barnes and Noble's.

3. Brick and Mortar – This is the conventional mode of retailing. The businesses that do not use the latest retailing channels and still rely upon the conventional mode belong to this category.

Advantages of e tailing/ Multi-Channel retailing

•

E-tailing offers unique advantages to the consumer that no other form of retailing can match.

• 1.Free availabilty of information about prodts• 2. allows for easier comparisons across broad product categories with the evolution of shopping bots and similar

mechanisms. • 3. The medium also offers flexible/dynamic pricing mechanisms to the consumer.

•4.Minimal investment - e-tailing does not require a retailer to invest in warehouses, showrooms or other commercial properties at prime locations. They operate through their web sites and thus save drastically on the real estate costs. The real estate costs in the metropolitan cities can be prohibitively high. Moreover, maintenance costs of a virtual store are negligible in comparison to a physical store.

Comfortable and easy to use - The Internet offers easy and comfortable access to all the required information by a customer. Over the Internet, product information is just a few clicks away, easily accessible from the comfort of a home. Traditional retailing is quite cumbersome in contrast to e-tailing. It involves frantic search for the required product, running up and down the retail store, asking the poorly trained store assistants for help. The process involves significant wastage of valuable time. Simply put, shopping on the Internet for fifteen minutes is equivalent to a two-hour trip to the mall. Consumers prefer to save their precious time so that they can better utilize it.

• Customer interaction - The greatest benefit of online commerce is its ability to interact with the customers. Such an interaction allows the retailers to reach the individual customers and react appropriately to their responses. Interaction acts as a vital tool for mass customization. The common examples include online marketing of books, flowers, software and education. This has also led to greater satisfaction among the online buyers. According to a research agency, 81% of the buyers were found to be highly satisfied with their online purchases.

Mass Media - A supermarket is limited in its area of operation. It caters to a specific geographical location such as a city and/or its suburbs. However, a web site is globally accessible leading to a worldwide reach and an increased potential customer base.

Search option - With web search capabilities (which need further development) it is easier to find the particular types of goods required by a customer. The consumer decides what he wants to buy rather than the retailer offering what he wants to sell. This ultimately translates into consumer empowerment.

User friendly - Customers can execute transactions via the same medium the information is provided, so there is no disconnect between the desire to purchase and the ability to purchase. (Payment schemes are still evolving and therefore this advantage is likely to become more apparent in the future.)

• Effective price discrimination - E-tailers can use price discrimination in an effective and efficient manner. E-tailers can use previous transactions to identify the likelihood of products being purchased at certain price points and use this information for price discrimination.

Customized product placement - E-tailers can change the online placement/display of a product based on the previous transactions so to increase the visibility of goods that the user is more likely to buy based on the previous encounter at the time purchase. This allows a contextual design of placement to ensure conversion of a visit/hit to the web site into a sale.

Global reach - Customers have a much wider choice at their fingertips (a variety of e-tail sites to choose from etc.) In this way, the web creates a global market place that brings together multiple consumers and retailers.

Disadvantages of e tailing/ Multi-Channel retailing

•Most of the e-tailing ventures have not been as profitable as they were expected to be, the primary reasons were:

Security issues - Security issues hold the center stage when it comes to consumer concerns while shopping through the online media. A lack of trust and privacy concerns prevents a lot of consumers from making online purchases. Consumers are also concerned with the use of their personal data provided during the online transactions.

Customer retention - In e-tailing, an increase in the customer retention by 5% leads to a corresponding increase in profits by 25%. Most of the people buying on the Internet do so out of curiosity and this makes a repeat purchase highly unlikely.

Unsuitable for certain product categories – In case of product categories that require relatively higher customer involvement, the e-tailing route is found to be grossly inadequate in providing sufficient information to the customers. Examples include retailing of products like clothes, cosmetics etc. Most customers are comfortable buying books and music on the Internet because the information required for making a purchase and the customer involvement is low. However, in case of a blue Trouser, the customer may want to know things such as: Which shade of blue is it? How does it feel on the skin? How easily does it crease? The traditional retailing does not suffer from such a problem. In the non-standard product categories, the Internet offers limited amounts of crucial information to the customer. In such cases, only the seller knows about the true quality of the trouser and this leads to an ‘information asymmetry’.

• Shopping is still a touch-feel-hear experience - some do not suffer from 'time-poverty' and shopping is still considered to be a family outing. Hence this type of an environment creates a problem of customer retention.

Complicated medium - Ease of use is a problem, as the web design may suffer from high complexity bordering on total chaos in some cases.

Navigation hiccups - E-tail stores do not have standardized designs in comparison to the physical retail stores and product catalogs. Therefore different user behaviors (navigation schemes) need to be learned for each e-tail store. This is a temporary issue as the evolution of the web continues.

Website design flaws - Graphic presentation and aesthetics may not be as compelling for a web site as in case of a physical retail store or a product catalog. This is a temporary issue that may resolve with the evolution of the web design.

Limited access to the Internet - Not all customers have access to the web, as they do to the postal system. This is a temporary issue as the evolution of the web continues.

Barriers to growth in e-tailing

These occurrences are definitely impacting the usage of the medium of

web for retailing and is termed as e-tailing

• The broad classifications of e tail are as follows• 1. Click – The businesses that operate only through

the online channel fall into this category. Prominent examples in this category include: Dell, Amazon.com and e-Bay.

2. Click and Brick – The businesses that use both the online as well as the offline channel fall into this category. example includes: Barnes and Noble's.

CRM TO CMR ENABLED BY internet :

• The next major development in the evolution of this e tailing is in CMR enabled retailing.

• CRM is termed as the process of actively seeking and integrating all the customer touch point inputs in order that the processes to keep and engage the customers are improved upon .

But the new paradigm is a movement from CRM TO CMR which is named as customer managed

relationship.

• It is a relationship in which a business uses a methodology , software and internet capability to control access to information and ordering. Primarily here it is so designed that customer can decide how he communicate with the company.

• The basic premise of CMR is that customer should be empowered to manage the relationship. like, allowing customer to select when, where and how interaction with marketer to take place.

• the main objective of CRM is to enable the marketer to change customers behavior in a way which is profitable to the company while simultaneously meeting the customer need.

• While CMR try to make customer feel that he is in control of the interaction and that they manage their relationship with the company.

AN example-CMR

• To take the example of banking and service sector organization ,in these customers usually do not entirely trust their financial service providers to act in their best interests, especially on advices related to investments. as the recommendations may be biased depending on commissions.

• so, conventional CRM practices like sending promo mail and statutory annual statements have limited appeal.

• Here, they can implement CMR, supported by a powerful web site which offers variety of tools for customers to input their data ,access information on various financial products ,work out alternative scenarios on their own, and take decisions on their own.

• In effect the relationship with the company is now managed by the customers.

THANKYOU