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Nonstore Retailing

13 May, 2016 - 13:23

Nonstore retailing describes sales made to ultimate consumers outside of a traditional retail store setting. In total, nonstore retailing accounts for a relatively small percentage of total retail sales, but it is growing and very important with certain types of merchandise, such as life insurance, cigarettes, magazines, books, CDs, and clothing.

One type of nonstore retailing used by such companies as Avon, Electrolux, and many insurance agencies is in-home selling. Such sales calls may be made to preselected prospects or in some cases on a cold call basis. A variation of door-to-door selling is the demonstration party. Here one customer acts as a host and invites friends. Tupperware has been very successful with this approach.

Vending machines are another type of nonstore retailing. Automated vending uses coin-operated, self-service machines to make a wide variety of products and services available to shoppers in convenient locations. Cigarettes, soft drinks, hosiery, and banking transactions are but a few of the items distributed in this way. This method of retailing is an efficient way to provide continuous service. It is particularly useful with convenience goods.

Mail order is a form of nonstore retailing that relies on product description to sell merchandise. The communication with the customer can be by flyer or catalog. Magazines, CDs, clothing, and assorted household items are often sold in this fashion. As with vending machines, mail order offers convenience but limited service. It is an efficient way to cover a very large geographical area when shoppers are not concentrated in one location. Many retailers are moving toward the use of newer communications and computer technology in catalog shopping.

Online marketing has emerged during the last decade; it requires that both the retailer and the consumer have computer and modem. A modem connects the computer to a telephone line so that the computer user can reach various online information services. There are two types of online channels: (a) commercial online channels—various companies have set up online information and marketing services that can be assessed by those who have signed up and paid a monthly fee, and (b) Internet—a global web of some 45,000 computer networks that is making instantaneous and decentralized global communication possible. Users can send e-mail, exchange views, shop for products, and access real-time news.

Marketers can carry on online marketing in four ways: (a) using e-mail; (b) participating in forums, newsgroups, and bulletin boards; (c) placing ads online; and (d) creating an electronic storefront. The last two options represent alternative forms of retailing. Today, more than 40,000 businesses have established a home page on the Internet, many of which serve as electronic storefronts. One can order clothing from Lands' End or J.C. Penney, books from B. Dalton or, or flowers from Lehrer's Flowers to be sent anywhere in the world. Essentially, a company can open its own store on the Internet.

Companies and individuals can place ads on commercial online services in three different ways. First, the major commercial online services offer an ad section for listing classified ads; the ads are listed according to when they arrived, with the latest ones heading the list. Second, ads can be placed in certain online newsgroups that are basically set up for commercial purposes. Finally, ads can also be put on online billboards; they pop up while subscribers are using the service, even though they did not request an ad.

Catalog marketing occurs when companies mail one or more product catalogs to selected addresses that have a high likelihood of placing an order. Catalogs are sent by huge general-merchandise retailers –J.C. Penney's, Spiegel—that carry a full line of merchandise. Specialty department stores such as Neiman-Marcus and Saks Fifth Avenue send catalogs to cultivate an upper-middle class market for high-priced, sometimes exotic merchandise.

Several major corporations have also acquired or developed mail-order divisions via catalogs. Using catalogs, Avon sells women's apparel, W.R. Grace sells cheese, and General Mills sells sport shirts.

Some companies have designed "customer-order placing machines”, i.e. kiosks (in contrast to vending machines, which dispense actual products), and placed them in stores, airports, and other locations. For example, the Florsheim Shoe Company includes a machine in several of its stores in which the customer indicates the type of shoe he wants (e.g. dress, sport), and the color and size. Pictures of Florsheim shoes that meet his criteria appear on the screen.

Integrated marketing

The death of retailing greatly exaggerated
Recently, the MIT economist Lester Thurow suggested that e-commerce could mean the end of 5,000 years of conventional retailing if online stores can combine price advantages with a pleasant virtual shopping experience. Let's face it: the growth of malls and megastores have shown that people want selection, convenience, and low prices, and that's about it. Sure, people say they would rather shop from the mom-and-pop on Main Street. But if the junk chain store out on the highway has those curling irons for a dollar less, guess where people go?
So a few years into the e-commerce revolution, here are a few observations and predictions:

Online stores need to become easier to use as well as completely trustworthy.

If people can go online and get exactly what they get from retail stores for less money, that is precisely what they will do.

Some stores will have a kind of invulnerability to online competition; i.e. stores that sell last-minute items or specialty items that you have to see.

Retail stores may improve their chances by becoming more multidimensional; i.e. they have to be fun to visit.

Still, not everything is rosy for e-tailers. Research provides the following insights:

For net upstarts, the cost per new customer is USD 82, compared to USD 31 for traditional retailers.

E-tailers customer satisfaction levels were: 41 per cent for customer service; 51 per cent for easy returns; 57 per cent for better product information; 66 per cent for product selection; 70 per cent for price, and 74 per cent for ease of use.

Repeat buyers for e-tailers was 21 per cent compared to 34 per cent for traditional retailers.

Suggstions to improve the plight of e-tailers include the following:

Keep it simple.

Think like your customer.

Engage in creative marketing.

Don't blow everything on advertising.

Don't undercut prices.

While all this advice is good, the recent roller coaster ride of high-tech stocks and its disappointing results for e-tailers has completely changed the future of e-tailing. While e-tailers have spent about USD 2 billion industry-wide on advertising campaigns, they often devote far less attention and capital to the quality of services their prospective customers receive once they arrive on site. E- tailers are learning what brick and mortar retailers have known all along, that success is less about building market share than about satisfying and retaining customers who can generate substantial profits. 1