2 Main Types of Retail Channels
A multichannel retailer is a retailer that
sells merchandise or services through more than one channel. Single-channel
retailers are evolving into multichannel retailers to attract and satisfy more
customers. By using a combination of channels, retailers can exploit the unique
benefits provided by each channel.
Type
# 1. Store Channel:
Stores offer a number of benefits to customers
that they cannot get when shopping through catalogues and the Internet.
(i) Browsing:
Shoppers will often only have a general sense
of what they want (such as a sweater, something for dinner, or a gift) but
don’t know the specific item they want. They go to a store to see what is
available before they decide what to buy. While many consumers surf the
Internet and look through catalogues for ideas, most consumers still prefer
browsing in stores.
(ii) Touching and Feeling Products:
Perhaps the greatest benefit offered by stores
is the opportunity for customers to use all of their senses when examining
products — touching, smelling, tasting, seeing, and hearing. While new
technologies can provide 3-D representations on a CRT screen, these visual
improvements will not provide the same level of information you get when
actually trying on that swimsuit.
(iii) Personal Service:
Although shoppers can be critical of the
personal service they get in stores, sales associates still have the capability
of providing meaningful, personalised information. They can tell you if a suit
looks good on you, suggest a tie to go with a dress shirt, or answer questions
you might have about what is appropriate to wear at a business casual event.
Customers for durable goods such as appliances report that salespeople are the
most useful information source, more useful than Consumer Reports, advertising,
and friends.
(iv) Cash Payment:
Stores are the only channel that accepts cash
payments. Many customers prefer to pay cash because it is easy, resolves the
transaction immediately, and does not result in potential interest payments.
(v) Immediate Gratification:
Stores have the advantage of allowing
customers to get the merchandise immediately after they buy it. If your child
has a fever, you are not going to wait a day or two for the delivery of a
prescription from Drugstore(dot)com.
(vi) Entertainment and Social Experience:
Stores provide more benefits to consumers than
simply having merchandise readily available and helping them buy it. For
example, in-store shopping can be a stimulating experience for some people,
providing a break in their daily routine and enabling them to interact with
friends.
All non-store retail formats are limited in
the degree to which they can satisfy these entertainment and social needs. Even
the most attractive and inventive web pages and video clips will not be as
exciting as the displays and activities. However, some store formats are more
exciting than others.
How
businesses can benefit from multi-channel retailing
Since multi-channel retailing is an
improvement over the most common strategies, let’s compare it
with single-channel retailing to get a better grasp of its benefits.
Better
revenue
Even after you invest a lot of money on
advertising and marketing and establish brand awareness, if your customers have
only one way of buying from you, it won’t necessarily increase your revenue.
But by spreading your business across multiple platforms, you could pop up more
often into a prospective customer’s view and therefore receive more attention.
This will give them the time needed to browse through your store, compare
prices, and do their research which is necessary for them to buy from you
eventually. Improved revenue is by far, the most prominent advantage that
multi-channel retailing displays.
More ways to buy from you
Like any other sceptical
person, most customers would hesitate to buy from a business that they stumbled
across once. And if that one viewing is all they ever get, then the chance of
them remembering your business and looking for you is impossibly low. With
just a single sales channel, all your customers would be forced to buy
from you using just that channel. And this is okay for customers
that have purchased from you earlier and trust your brand, but it doesn’t
necessarily attract new customers who are considering buying from your
business. So, with multi-channel retailing, you can offer your
customers multiple ways to buy from you, from which they can select
one based on their comfort and convenience. This will give you a competitive
advantage over single channel businesses. Simply put, more ways to
buy from you could mean more customers.
Collect valuable data on customer purchases
Multi-channel
retailing allows you to collect a lot more data on customer purchases
compared to a single channel. By doing this, you
can tell which sales channels your customers seem to prefer
and which ones they don’t, so that you know what specific parts of
your business to work on and how to promote your
business. Additionally, with a single sales channel, you wouldn’t be able
to compare your sales with any other channel since you’re stuck with the one
you have. Comparing several channels gives you more perspective. If you
don’t have anything to compare to and you’re selling X volume of goods per
month on one channel, you might think that’s pretty good. If you start using
several channels and see that you’re selling 10x volume of goods on another
channel, you haven’t only learned that the other channel is better—you’ve also
learned that you can shoot for much higher than your original X
volume. Also, you don’t have to only compare different channels’ overall
performance; you can also compare how different products perform on different
channels. Knowing which product to promote on which channel is part of the
valuable data you’re collecting, right?
What are the
challenges of multi-channel retailing?
Although multi-channel retailing is a
helpful strategy, there are a few factors that businesses need to consider
before implementing it:
Difficulty coordinating inventory across sales channels
By far, the
biggest challenge when it comes to multi-channel retailing is the
difficulty of managing inventory across all the different sales channels.
This is because each channel is independent of the others—so a change in one
channel will not be reflected in the others unless they are manually
updated. Suppose a multi-channel retailer has 3 different channels: a
physical store, an ecommerce platform, and a third-party marketplace like Amazon.
They run out of stock for a specific product and immediately mark it as
out-of-stock in their ecommerce platform, but forget to mark it in their
third-party marketplace. Now if a customer places an order for that product in
their third-party marketplace, the retailer will either have to turn the
customer away or keep them waiting, both of which are embarrassing and not good
for the business.
Costly
investment
Multi-channel
retailing is expensive. On its own, it might not seem to cost that much,
but when added to other pricey business expenses like marketing ventures and
advertisements, it could sum up to be a large amount of money. It is
especially costly if you plan on setting up a lot of channels. This is because
each channel will require you to incur another round of expenses,
like setup costs, customization, and hiring employees to manage it. Test
the waters first and start out small with just one or two extra sales
channels. Once you have a proper strategy in place, you can start adding more.
In an attempt to get customers to buy
from them, different businesses experiment with different strategies. One such
strategy is multi-channel retailing, which is the practice of selling across
multiple sales channels. Unlike omni-channel retailing, multi-channel retailing
only allows buyers to use one sales channel per transaction. With
multi-channel retailing, businesses can offer their customers different ways to
buy from them, boost their revenue, and also collect important data on their
customers’ purchases which they can use to improve their sales further. If
multi-channel retailing seems like a strategy that would suit your business,
then check it out today!
Type
# 2. Catalogue Channel:
Catalogue
Marketing is form of direct marketing where the seller prepares catalogues of
merchandise or products and sells directly to the customer. The catalogues are
generally in printed form but can also be distributed in the form of CDs. To
avoid printing and distribution costs, the catalogues are being increasingly
made available online. Products from various companies or vendors may be
combined into a single catalogue to provide a one shop point for customer
looking out for a particular type of product.
Example: Avon is
a good example of a company successfully leveraging this channel to sell its
range of cosmetics.
Catalogue
marketing occurs when companies mail one or more product catalogues to selected
addresses. They may send full-time merchandise catalogues and business
catalogues, usually in print form but also sometimes as CDs, Videos.
The success of
catalogue marketing depends on the company’s ability to manage its customer
lists so carefully that there is little duplication or bad debts, to control its
inventory carefully, to offer quality merchandise so that returns are low, and
to project a distinctive image. Catalogue marketing is common in USA, and
Europe with reputed companies such as Tiffany and Co., Patagonia, Eddie Bauer
and Lands’ End operating in this field successfully.
Convenience Catalogues, like all non-store
formats, offer the convenience of looking at merchandise and placing an order
any day at any time from almost anywhere. With a catalogue, consumers have the
added convenience of not being restricted to a place with an Internet
connection and a computer.
They can look through a catalogue on the beach
or propped up in bed. Finally, the information in a catalogue is easily
accessible for a long period of time. Consumers can refer to the information in
a catalogue anytime by simply picking it up from the coffee table. The
development of “mega-logs,” catalogues with magazine-type editorial content,
enhances the desire to keep catalogues readily available.
(i)
Safety – Security in malls and shopping areas is becoming an important
concern for many shoppers. Non-store retail formats have an advantage over
store-based retailers by enabling customers to review merchandise and place
orders from a safe environment — their homes.
(ii)
Quality of Visual Presentation – The photographs of merchandise in
catalogues, while not as useful as in-store presentations, are superior to the
visual information that can be displayed on a CRT screen.
Online Catalogue
To save on the cost of printing and mailing and to allow
retailers to update prices, products and promotions more quickly, some business
put their products in an online catalogue. The products are grouped and
displayed in a similar fashion to a print catalogue, but consumers can sort
items by price, category, manufacturer or other criteria. These catalogues
allow shoppers to purchase immediately, using a virtual shopping cart and an
electronic payment method.
Single Company Catalogue
Some companies with many products produce their own catalogue.
Examples include manufacturers of apparel, footwear, sporting goods, kitchen
accessories, auto parts, home furnishings, lawn and garden items, health,
beauty and food items.
The manufacturer might group similar products to allow
consumers with a specific interest to quickly find what they want, or they
might spread items throughout the catalogue to make shoppers view more items,
hoping to increase impulse buys. The manufacturer processes the orders, ships
the items and handles customer service, cutting out the cost of wholesalers or
distributors.
Multiple Company Catalogue
Some catalogue companies feature products from a variety
of manufacturers, giving companies with fewer products a chance to make catalogue
sales. This allows mass retailers to include more items in their catalogues. In
these types of catalogues, you might see several competing products on the same
page.
The catalogue manager takes direct payment from the
consumer, giving a portion of the sale to the manufacturer after the money is
collected. Some multi-company catalogue marketers fulfil orders from their
warehouses, while others send orders to the manufacturer, who ships the item
and handles returns and customer service.
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