CHAPTER 3
MULTICHANNEL AND OMNICHANNEL RETAILING
ANNOTATED OUTLINE
INSTRUCTOR NOTES
• 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 (Internet, mobile, catalog/direct mail, direct selling,
TV home shopping, vending machine, etc.).
• A retail channel is the way a retailer sells and delivers
merchandise and services to its consumers.
LO 3-1 Understand the channels
used by retailers.
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
I. Relative Strengths of Retail Channels
LO 3-2 Compare the relative
strengths of the major retail
channels: stores; Internet, mobile,
and social; and catalog and other
nonstore channels.
A. In-Store Channel
• Retailers generally make most of their revenues through
their brick-and-mortar or store channels.
PPT 3-8 provides a summary of the
unique benefits of stores,
catalogs, and the Internet.
1. Touch and Smell of Products
PPT 3-9 covers the unique benefits
• Perhaps the greatest benefit offered by stores is to allow
customers to use all of their senses when examining
products—touching, smelling, tasting, seeing, and hearing.
provided by the store channel.
Ask students if they consider any
store to be their favorite for
shopping. In other words, do they
look forward to shopping at that
store? If so, why?
2. Personal Service
3. Risk Reduction
• When customers purchase merchandise in stores, the
physical presence of the store assures them that any
problems with the merchandise will be corrected.
4. Immediate Gratification
Which types of merchandise do
5. 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.
Ask students to describe their
favorite entertainment elements
of the store shopping experience.
Which retailers do they believe
incorporate these entertainment
elements very well?
6. Cash Payment
electronically sending payment information via the
Internet.
B. Internet Retailing
• Internet retailing involves retailers interacting with
consumers via the Internet, whether they use a traditional
computer or a laptop, a variety of sizes of tablets, or a
See PPT 3-11, 3-12
Discuss the advantages shopping
on the Internet has over shopping
smartphone.
• The mobile channel (also called mobile retailing, mobile
commerce, or m-commerce) implies accessing the Internet
using a tablet or smartphone.
in a store.
1. Deeper and Broader Selection
• A potential benefit of the Internet channel is the vast
broader selection.
Ask students about the products
2. More Information for Evaluating Merchandise
• An important service offered by retailers is the provision of
information to help customers make better buying
decisions. The retail channels differ in terms of how much
information they provide and whether customers can
format the information to compare different brands easily.
Discuss with students if the use of
customer reviews is a deciding
factor when making purchases
online. How does this compare
with a retailer’s ratings?
3. 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.
Ask students to compare
“chatting” online with customer
service representatives with being
helped in a store by a sales
associate. Discuss factors that
may impact the experience. Which
is more personalized?
4. Expanded Market Presence
• By adding the Internet channel, retailers can expand their
market without having to build new stores or incur the
high cost of additional catalogs.
retailers with strong brand names but limited locations and
distribution.
5. Information to Improve Shopping Experience across
Channels
• Information on the Internet channel database can be
frequently updated and will always be available. The cost
of adding information to an Internet channel is likely to be
far less than the cost of continually training thousands of
sales associates.
like a sales associate would. The depth of information
available at a retailer’s website can provide solutions to
customer problems.
Ask students about a new
purchase context; for example,
buying a good home theater
system. If they do not know
anything about the product, or
how to evaluate it, where would
they look for information first, the
Internet or the local electronics
store? What are the reasons
6. Perceived Risks in Internet Shopping
• Although many consumers remain concerned about credit
card security, extensive security problems have been rare.
• Consumers are concerned about the ability of retailers to
collect information about their purchase history, personal
information, and search behavior on the Internet without
their knowledge.
C. Mobile Retailing
• Due to the rapid growth of domestic and international
broadband access through handheld devices, such as
tablets and mobile phones, retailers are very interested in
developing this channel’s potential.
Ask students to discuss the
advantages and disadvantages of
shopping on a mobile device. How
does this compare with Internet
shopping?
device’s smaller screen.
• The use of tablets may provide the best trade-off between
the portability of mobile phones and the navigation ease of
websites accessed by computers.
D. Social Retailing
• Social retailing, also known as s-retailing, involves
conducting purchase transactions through a social media
site.
• The largest number of social retailing orders comes from
Facebook.
E. Catalog and Other Nonstore Channels
• The catalog channel is a nonstore retail channel in which
the retail offering is communicated to customers through a
catalog mailed to customers.
• Safety. Nonstore retail formats have an advantage over
store-based retailers by enabling customers to review
merchandise and place orders from a safe environment—
their homes.
• Catalogs, however, may represent an unnecessary waste of
natural resources.
See PPT 3-10
2. Automated Retailing is a retail channel in which
II. Opportunities Facing Multichannel and Omnichannel Retailers
• Consumers want a seamless experience: Whether they
solicit a sales associate for help, seek out an in-store kiosk,
call into a call center, or log onto a website, they want to
be recognized. Retailers need to be consistent with the
information they provide.
• They can use their stores as “warehouses” for gathering
merchandise for delivery to customers.
• Customers also can be offered the opportunity to pick up
and return merchandise at the retailer’s stores rather than
pay shipping charges.
LO 3-3 Describe the opportunities
associated with a true
omnichannel strategy.
III. Challenges Facing Multichannel and Omnichannel Retailers
• Some of the challenges and trade-off decisions that
and showrooming.
LO 3-4 Analyze the challenges
facing multichannel and
omnichannel retailers.
A. Multichannel and Omnichannel Supply Chains and Information
Systems
• Most retailers don’t have distribution systems set up to
accommodate orders from multiple channels.
develop new transportation strategies.
PPT 3-14
B. Consistent Brand Image across Channels
• Retailers need to provide a consistent brand image of
themselves and their merchandise across all channels.
PPT-3-15
Ask students to discuss a retailer
that has a different online feel or
image versus its in-store
experience. What retailers
provide a seamless experience
well?
C. Merchandise Assortment
PPT 3-15
only buy in store?
D. Pricing
• Many customers expect prices to be the same across
channels (excluding shipping prices).
E. Reduction of Channel Migration
• Channel migration is when customers gather information
from one of its channels, then buy from a channel hosted
by a competitor, a frustrating problem for retailers.
Do students use the Internet to
comparison shop? How many
students engage in showrooming?
IV. SUMMARY
Discuss the advantages and
• Traditional store-based and catalog retailers are adding
Internet channels and evolving into integrated,
customer-centric, multichannel retailers—an evolution
driven by the increasing desire of customers to
communicate with retailers any time, any place, and
anywhere.
• There are many advantages and challenges across the
various channels.
disadvantages across the major
channels. Have any of the
disadvantages been lessened
with an omnichannel approach?
ANSWERS TO SELECTED “GET OUT AND DO IT!” QUESTIONS
2. INTERNET EXERCISE Go to the websites of J. Crew (www.jcrew.com), JCPenney
(www.jcpenney.com), and American Eagle Outfitters (www.ae.com) and shop for a pair of
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:
Convenience – no traffic, parking or crowds, available 24/7, no geographical constraints.
Cost – same price or cheaper online, many offer free shipping with a set dollar purchase,
also save on time, hurried shopper (temporal cost). People are looking for bargains.
3. INTERNET EXERCISE Assume that you are getting married and planning your wedding.
Compare and contrast the usefulness of www.theknot.com and www.mywedding.com 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
these sites. They can learn what other couples did for their weddings. Couples can
4. INTERNET AND SHOPPING EXERCISE Pick a merchandise category like microwave ovens,
power drills, digital cameras, blenders, or coffeemakers. Compare a retailer’s offering in
Chapter 03 – Multichannel and Omnichannel Retailing
its local store and its Internet site. What are the differences in the assortments offered
through its store, Internet, mobile, and social channels? Are the prices the same or
different? What has the retailer done to exploit the synergies among the channels?
Students will find that some retailers have a consistent pricing strategy and merchandise
5. INTERNET AND SHOPPING EXERCISE Access the websites of Home Depot and Macy’s using
your mobile phone and computer. What are the differences in the ease of navigation
when looking at the presentation of merchandising using the two methods of accessing
the websites?
Students will find that these retailers have mobile sites that have less information (including
videos, pictures, etc.) to facilitate easier downloading and information search. The navigation
ANSWERS TO DISCUSSION QUESTIONS AND PROBLEMS
1. Why are store-based retailers aggressively pursuing sales through Internet channels?
Stores have realized several distinct benefits of an Internet channel that overcome their
traditional limitations. First, an Internet channel enables stores to expand nationally and
globally at a relatively low cost. Consider, for example, a regional store with locations in
four states in the Western U.S. This store can service customers in other parts of the
2. What are the differences between a multichannel, cross-channel, and omnichannel
retailer? Provide an example of each.
Multichannel retailing is when retailers offer more than one channel to sell and deliver
merchandise and services to consumers. Channels operate without integrating operations
between them. Almost all large retailers that operate stores are multichannel retailers, with
3. What aspects of omnichannel retailing would benefit you as a consumer?
If retailers can devise an effective omnichannel strategy, they can achieve several benefits.
In particular, consumers like the idea of a seamless experience, so an omnichannel
4. Choose a retailer from whom you have purchased through multiple channels. Is it a
multichannel, cross-channel, or omnichannel retailer? Justify your answer.
Answers will vary by student, but the definitions one of each term should be explained.
5. Using the same retailer that you chose in the previous question, how well have they
integrated their operations across channels? How similar and different are their assortments
and prices? Should they do these things differently? Why or why not?
Answers will vary by student.
6. Do you participate in showrooming? Why or why not?
Answers will vary by student; however, students should define the term showrooming
7. From a customer’s perspective, what are the benefits and limitations of stores? Internet?
Mobile? Social? Catalogs and other nonstore channels?
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
Internet channels offer the convenience of 24/7 retailing. Customers can order anytime
and can easily comparison shop for products, brands, and prices. Customers are exposed to
a very wide assortment of products and brands and can make choices not only across
products and brands but also across the retailers who stock them. There is greater
personalization which benefits customers in selecting products and making purchase
decisions. Detailed information, even on new product categories, can be obtained more
easily.
Mobile offers the same benefits as computer-based Internet channels, plus customers can
easily carry the devices in their purses or pockets, so they can access retail sites from
anywhere. Additionally, the customer–retailer interactions can be location-sensitive.
However, the major disadvantage of a mobile channel, compared with a computer-based
Internet channel, is the mobile device’s smaller screen. Additionally, there may be
connectivity issues or greater use of consumer mobile data plans.
Catalogs and other nonstore channelsallow customers the convenience of any time, any
place shopping. Consumer and credit information is better protected when shopping
through a catalog. Also, many catalogs provide items that are not available in stores.
Catalogs are particularly convenient when the product category selection is limited in local
However, catalogs and nonstore channels provide very little merchandise information that
the customer may desire about the product. While some of this information may be
obtained over the phone for catalog channels, in most cases, the customer may only
encounter an order taker with limited knowledge at the other end of the phone line. For
nonstore channels, like vending machines, there is a lack of product information that is
readily available. Returns are cumbersome for catalog and nonstore retailers since the
8. 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-
fashion apparel; pharmaceuticals; health care products such as toothpaste, shampoo, and
cold remedies? Why?
Lower end costume jewelry can be and is sold effectively by nonstore retailers. This is
because this merchandise can be presented well and accurately in a catalog and on
television, or even over the Internet.
Computer software could be sold well over the Internet as many software applications just
require downloads, making the Internet the easiest place for purchase. However, if a
consumer has a concern or question about a particular type of software, it is probably best
to visit a store and seek expertise.
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 online.
CONNECT ACTIVITIES FOR CHAPTER 3
Activity Title
Learning Objective(s)
Dee Dee’s Dishes
Becomes a
Multichannel Retailer
Case Analysis
Single-Channel vs.
Multi-Channel
Retailers
3-1 Understand the
channels used by
retailers.
Benefits of Different
Retail Channels
Drag and Drop;
Matching (accessible
version)
Single-Channel vs.
Multi-Channel
Retailers
3-1 Understand the
channels used by
retailers.
3-2 Compare the
relative strengths of
the major retail
channels: stores;
Internet, mobile, and
social; and catalog
and other nonstore
channels.
channels.
3-4 Analyze the
challenges facing
multichannel and
omnichannel
retailers.
Types of Social Media
Click and Drag;
Matching (accessible
version)
Relative Benefits of
Retail Channels
3-3 Describe the
opportunities
associated with a true
omnichannel strategy.
social; and catalog
and other nonstore
channels.
3-3 Describe the
opportunities
associated with a true
omnichannel strategy.
social; and catalog
and other nonstore
channels.
3-3 Describe the
opportunities
associated with a true
omnichannel strategy.