Part Three: Chapter 13 Internet Retailing

© Copyright 2006, Thomson South-Western, a division of the Thomson Corporation

Internet Marketing & e-CommerceWard HansonKirthi Kalyanam

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Part Three: Chapter 13Internet Retailing

“A salesman is got to dream, boy. It comes with the territory.”

Arthur Miller, Death of a Salesman


Growth of Online Retail

• Quarterly measurement of e-commerce added to U.S. retail activity in 1999

• Grew from $5 billion in Q4 1999 to $23 billion in Q4 2005

• Annual online retail exceeded $84 billion in 2005

• Still, just 2.4 percent of all retail sales



DATA SOURCE: www.census.gov



• Online retail percentages vary greatly across product categories

• Key areas for retail sales:– Computer hardware and software– Tickets– Books

• Top categories involve digital products or information-rich purchases



Consumer e-commerce penetration by product categorySOURCE: The State of Retail Online, 6.0, a Shop.org Survey conducted by Forrester Research



• For Internet retailers, better performance has meant better results– Benefits of higher inventory productivity– Swift response to changes in customer

demands and product transformations – Customer satisfaction generally higher



American customer satisfaction index scores

Data Source: American Customer Satisfaction Index, www.theacsi.org


iPACE and Online Shopping

• Understanding basic consumer needs to find right approach for right channel: – Information– Price– Assortment– Convenience– Entertainment



• Information: Quality and features of a product, from initial consideration set through final purchase, shipping and returns



• Price: Draw of lower prices and ease of comparison, but consumers also engage in price partitioning – evaluating influence of taxes and shipping costs on bottom line



• Assortment: Greater variety and availability online, products are easier to configure and prices easier to adjust



• Convenience: Avoiding the hassle of traditional stores, easing repeat purchases



• Entertainment: The online thrills of eBay vs. the lost social aspect of shopping excursions with friends


Online Shopping Process

The consumer shopping cycle



The consumer shopping cycle on a web site



• Step One: Finding the right product– Influence of search and browsing to find

right product in rapidly expanding Web marketplace

– Helping shoppers narrow selection



• Step Two: Acquiring information – Overcoming the physical limitations of

online shopping– Product descriptions through images,

zoom, ratings and reviews – Personalized information through virtual

models and diagrams– Cross selling and solution selling

opportunities



Virtual model™ on Lands’ End.com



• Step Three: Evaluating alternatives– Two versions of the choice model

• Compensatory choice model compares products and services on all attributes

• Non-compensatory choice model compares products based on certain attributes, eliminates products without those key features

– Shopping tools – such as a comparison matrix or assistant – reduce consumer effort; tools that screen products have strongest impact on consumer accuracy



• Step Four: Placing the order– Many Internet shoppers fail to complete

attempted purchases• Poor information design, lack of transparency

on ship costs– Efficient reordering and repeat purchase

systems help track customers and hold marketing campaigns accountable



• Step Five: Following up– Post-purchase notifications such as order

confirmation, total price, shipping date and expected delivery date

– Returns made simpler with prepaid return labels, merchandise pickup


Multi-Channel Retailing

• Understanding the hybrid customer (the shopping “centaur”) who is willing to shop online but buy at a traditional store, and visa versa – Customers who shop regularly in

traditional stores are least likely to use multiple channels

– Online and catalog shoppers more likely to use other channels for some purchases



Shopper Classification

Percent Purchasing in Channel

Online Store Catalog

Online 100% 78% 45%

Store 6% 100% 22%

Catalog 23% 36% 100%

Customers from one channel who purchased in another

SOURCE: The State of Retail Online, 5.0, Shop.org



Shopper Classification

% Reporting a Purchase Influenced By

Online Store Catalog

Online 100% 25% 68%

Store 22% 100% 26%

Catalog 39% 26% 100%

Buyers who purchased something in one channel previously seen in another channel

SOURCE: Company reports as compiled by Forward Retailing, Inc.



Shopper groups indicating preference for research and buying

SOURCE: The State of Retail Online, 5.0, Shop.org



• Challenges for retailers working across online and traditional channels– Determining what products are sold in the

store, online or through catalogs– Communications and logistics– Pricing discrepancies – Planning consistent promotional offerings– Rewarding the right seller: Does the credit

go online or off?

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Part Three: Chapter 13 Internet Retailing

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