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Chapter 03 - Multichannel Retailing
CHAPTER 3
MULTICHANNEL RETAILING
ANNOTATED OUTLINE
INSTRUCTOR NOTES
I. Retail Channels for Interacting with
Customers
• Retailers are categorized by their offering
(food, general merchandise or services) and
then by the channel(s) they use to reach
their customers whether store- or nonstore-
based (electronic, mobile, catalog/direct
mail, direct selling, TV home shopping,
vending machine, etc.).
See PPT 3-3,3-4, 3-5, 3-6, 3-7
Ask students to provide examples of retailers
who use multiple channels. What are the
various channels used by each? Do the
students giving these examples use all the
channels used by the retailer? If so, how and
when?
3-2
A. Store Channel
• Stores offer a number of benefits that
customers cannot get when shopping
through catalogs and the Internet. These
benefits include:
• Personal Service. Store sales associates
still have the capability of providing
meaningful, personalized information.
Customers for durable goods, such as
appliances, report that salespeople are the
most useful information source.
• Entertainment and Social Experience.
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
nonstore retail formats are limited in the
degree to which they can satisfy these
entertainment and social needs.
PPT 3-8 provides a summary of the unique benefits
of stores, catalogs, and the Internet.
PPT 3-9 covers the unique benefits provided by the
store channel.
Ask students to describe their favorite
entertainment elements of the store shopping
experience. Which retailers do they believe
incorporate these entertainment elements very
well?
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3-3
advantage of allowing customers to get the
merchandise immediately after they buy it.
require the immediate gratification factor? For
which merchandise categories is immediate
gratification not such a big deal?
B. Catalog Channel
• Convenience. Catalogs, like all nonstore
formats, offer the convenience of looking
at merchandise and placing an order any
day at any time from almost anywhere.
See PPT 3-10
C. Internet Channel
• In addition to the convenience and security
of shopping from home or work at any
time, the electronic channel has the
potential for offering a greater selection of
products and more personalized
information about products and services.
These benefits include:
See PPT 3-11, 3-12
Discuss the advantages shopping on the Internet
has over shopping in a store. Shopping through a
catalog.
Chapter 03 - Multichannel Retailing
3-4
brands easily.
• Also, information on the electronic channel
database can be frequently updated and
will always be available. The cost of
adding information to an electronic channel
is likely to be far less than the cost of
continually training thousands of sales
associates.
• Personalization. The most significant
potential benefit of the Internet channel is
its ability to personalize the information for
each customer economically. The Internet
offers the opportunity to provide
“personal” service at a low cost.
know anything about the product, or how to
describe the experience and the types of
information they were able to find.
Chapter 03 - Multichannel Retailing
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create a personal homepage that is tailored
to that customer’s individual needs.
• Using a cookie (a small computer program
that provides identifying information
installed on your hard drive), the retailer
can provide personalized product
information, recommendations or reviews.
D. Using the Internet to Improve Multichannel
Shopping Experience
One common phenomenon in Internet retailing is
known as "abandoned shopping carts." This
occurs when customers select items from the
E. Comparison of Electronic and Mobile Phone
Internet Channels
• Due to the rapid growth of domestic and
international broadband, the use of tablets
and smartphones is increasing.
PPT 3-13
Ask students how much they use their smartphone
or tablet for shopping? Most Millenials use their
smartphone or tablet to comparison shop or search
for information and then make purchases on their
II. Challenges Facing Multichannel Retailers
• Consumers want a seamless experience:
Whether they solicit a sales associate for
provide.
A. Multichannel Supply Chains and
Information Systems
PPT 3-14
Chapter 03 - Multichannel Retailing
3-6
• Most retailers don’t have distribution
B. Centralized versus Decentralized
Multichannel Retailing
• A critical decision facing multichannel
channel.
PPT 3-14
C. Consistent Brand Image across Channels
PPT-3-15
Ask students to discuss a retailer that has a
D. Merchandise Assortment and Pricing
• Different assortments are often appropriate
for different channels. As previously
mentioned, the Internet is usually able to
PPT 3-15
Ask students how important touching and feeling
III. Shopping in the Future
• The seamless interface across channels that
See PPT 3-17
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customers in the future may experience is
illustrated through a scenario.
A. Shopping Experience
• The scenario described illustrates the
See PPT 3-18
IV. SUMMARY
• Traditional store-based and catalog
retailers are adding electronic channels
and evolving into integrated, customer-
ANSWERS TO SELECTED “GET OUT AND DO ITS”
khaki pants. Evaluate your shopping experience at each site. Compare and contrast the sites
and your experiences on the basis of characteristics you think are important to consumers.
Students should consider the six reasons consumers like to purchase online:
Chapter 03 - Multichannel Retailing
3-8
3. INTERNET EXERCISE Assume that you are getting married and planning your wedding.
for planning your wedding. What features of the sites do you like and dislike? Indicate the
specific services offered by these sites that you would use.
Engaged couples can plan for their ceremony, reception and honeymoon online with
4. INTERNET AND SHOPPING EXERCISE Pick a merchandise category like microwave
ovens, power drills, digital cameras, blenders, or coffee makers. Compare a retailer’s
offering in its local store and its Internet site. What are the differences in the assortments
offered through its store and Internet channel? Are the prices the same or different? What has
the retailer done to exploit the relationship between the channels?
5. INTERNET AND SHOPPING EXPERIENCE Access the websites of Home Depot and
Macy’s using your mobile phone and computer. What are the differences in the ease of
Chapter 03 - Multichannel Retailing
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ANSWERS TO DISCUSSION QUESTIONS AND PROBLEMS
1. Why are store-based retailers aggressively pursuing sales through an electronic
channel?
Stores have realized several distinct benefits of an electronic channel that overcome their
traditional limitations. First, an electronic channel enables stores to expand nationally and
Chapter 03 - Multichannel Retailing
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2. From a customer's perspective, what are the benefits and limitations of stores?
Catalogs? Retail web sites?
Stores allow customers the benefits of a high sensory experience when browsing and
shopping. Customers can touch and feel products and seek information from qualified sales
However, catalogs provide very little pre-sales information that the customer may desire
about the product. While some of this information may be obtained over the phone, in most
cases, the customer may only encounter an order taker with limited knowledge at the other
end of the phone line. Customers can see better pictures than over the computer screen, but
sometimes critical information may not be available. Returns are cumbersome, since the
customer would have to repackage the product and may have to drop it off at the post or UPS
delivery location. Moreover, catalogs provide limited assortment.
Chapter 03 - Multichannel Retailing
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However, the consumer may be wary of unknown retailers over the Internet, fearing that the
order may not be fulfilled or that the delivery promises may not be kept or the product
quality may not be as advertised. Also, customers find their risks to be high, especially when
they have to provide personal and credit card information over the Internet. Consumers may
find that less pre-sales information is available for products that require touching-and-feeling
before purchase. Also, the costs of making a bad decision are high, especially since Internet
retailers vary in terms of their return policies (some charging a hefty restocking fee).
4. Why are the internet and catalog channels so popular for gift giving?
Buying gifts from electronic retailers and catalogs offers the benefit of saving customers the
5. Should a multi-channel retailer offer the same assortment of merchandise for sale, at
the same price, on its websites and in its stores? Why or why not?
Customers are likely to expect pricing consistency across all of the retailer’s channels. In
general, a multichannel retailer should attempt to offer the same assortment of merchandise,
at the same prices, across all channels. By ensuring parity between the store, catalog, and/or
web site, the retailer sends a uniform message about its quality, prices and reputation to the
consumer.
6. Which of the following categories of merchandise do you think could be sold most
successfully through an Internet channel: jewelry, TV sets, computer software, high-
Chapter 03 - Multichannel Retailing
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fashion apparel, pharmaceuticals, health care products such as toothpaste, shampoo,
and cold remedies? Why?
Lower end costume jewelry can and is sold effectively by nonstore retailers. It is because
this merchandise can be presented well and accurately in a catalog and on television, or even
over the Internet.
Pharmaceuticals have experienced higher than average sales growth through nonstore
retailers recently. It is however, difficult to determine what the ultimate nonstore retailer
sales potential will be for pharmaceuticals. The population is getting older, thereby
increasing the demand for many pharmaceutical products. But many pharmaceutical
products require a prescription. At the moment, the practices of some Internet retailers of
prescription pharmaceuticals are being called into question because in some cases it is too
easy for patients to get prescriptions from a physician to be filled on line.
Chapter 03 - Multichannel Retailing
7. Assume you are interested in investing in a startup Internet retailer that targets people
who enjoy outdoor recreation such as hiking, rock climbing, and kayaking. What
merchandise and information would you offer on the site? What type of an entity do
you think would be most effective in running the site: a well known outdoors person, a
magazine targeting outdoor activity, or a retailer selling outdoor merchandise such as
Patagonia or REI. Why?
The focus of the site, particularly if run by a retailer, is to sell outdoor equipment. The
equipment therefore would be the focal point of the site and would be organized around
8. What are the advantages to customers of accessing the Internet through a mobile device
or a computer when browsing a website? When learning special promotions?
Accessing the Internet through a mobile device is convenient for customers because
consumers can access their smartphone almost immediately. Mobile sites are especially
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9. When you shop online for merchandise, how much time do you spend browsing versus
buying? When you shop in a store for merchandise, how much time do you spend
browsing versus buying?
Both store and Internet channels provide ample opportunities for browsing behaviors.
Students’ answers will likely vary significantly as some will indicate browsing on one of the
