Multichannel retailing: the missing piece?

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A retail channel represent a section of the value chain that connects manufacturers with the customers of its products and services. Physical store are the most common channel that we come across, but in recent years the non-store channels have also grown in prominence. Examples of such non-store channels are the Internet, direct selling, television home shopping, and a host of other smaller channels.

We usually understand the physical store channel well, but it is important to point out that in a country like India, it is important to further segment the store channel to see opportunities & put the right focus. For example the Army Canteen is a peculiar subset of such stores and should ideally be treated separately for any company that sells products in these stores. Indian Railways (IRCTC) also represents a unique channel in India. State-run PDS related channels in certain states (like Maveli Stores in Kerala) can also be considered for specific focus by FMCG (CPG) companies.

Coming back to non-store channels, let’s look at them in brief:

Direct Selling:    

As the term implies, it simply means selling direct to the end-users. It is recognized as an approach in the distribution of products and services that reaches directly to the consumers in their homes.

So in direct selling, salespeople interact with customers face-to-face in a convenient location, either at their home or at work. These salespeople demonstrate product benefits and explain a service (say an insurance policy), take the order, and take care of the delivery of that product or service.

This is a highly intensive channel and can be very effective for high end/costly/big budget products & services. The model is also very costly due to high degree of human involvement. Worldwide, the industry is pegged at ~$100 billion.  Categories that work well for this channel are insurance, personal care, wellness (weight management products), or other products that may require a higher consultative mode of selling (perhaps holiday programs, stem cell services for newborn babies etc)

Big companies in this field in India are Amway (biggest), Eureka Forbes, HUL(unilevers with its range of Aviance products), Tupperware, Avon, Oriflame etc.

At times, the companies that use this model also get into trouble due to regulatory issues. There is a very thin line that divides some of these companies from the traditional Multi level pyramid structures, where the only way to grow is to make new members (There are many notorious examples where the products were used as an excuse for the enrollment fee). China had banned direct selling in 2006, only to lift it few years later after a heavy lobbying from such companies. Amway faced a lot of legal issues in India in 2013. Litmus test for a successful direct selling scheme is the repeat consumer purchases as a ratio of total sales. If the company’s turnover is growing primarily through new enrollments, then that’s a big warning sign!

 

Television Home Shopping:

This is a channel which uses the mass reach of TV as a medium. A product or service is usually presented in an Infotainment format of 30-60 minute long lots. A complete demonstration, reviews & opinions on the product or service are covered during this period which usually ends with a high order pitch for buying the item.

Products that do well in this channel are wellness (height gain /weight reduction, body sculpting), beauty & personal care, apparel & kitchenware. One common thread among these categories is that they are primarily oriented towards ladies, who usually constitute a big chunk of TV audience.

E-Retail: Perhaps the fastest growing non-store channel. Customer can go to a website (either company specific or a general one) and browse through a vast range of products. Several images, reviews & ratings are available to help in decision making process. In fact this database of a large number of neutral customer rating is one of the major advantage that E-retail provides over the traditional physical stores. People usually feel more comfortable in buying products that have a universal good rating and a high number of positive reviews.

Non Store retail market in India: Non Store retail market in IndiaNon Store retail market in India: Non Store retail market in India

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Convenience of home, better assortment, cheaper prices/discounts, better research, non-commitment are few of the reasons why e-retailing is growing so rapidly across the world. The channel works well for products that have a low touch & feel requirement (like Books, memory cards, DVDs) or very standard products (like branded appliances) and to some extent branded apparel. Retailers do try to overcome the limitations of this channel (like lack of human touch, risks of bad purchase, fit for apparel purchases, risk of financial frauds while using credit cards) by offering a generous return policy & ‘cash on delivery’.

Others:

Automated retailing(through vending machine): which is no longer limited to soft drinks these days, Snacks, magazines, DVDs & a lot many other things are getting dished out through these vending machines these days.

There are few other channels like Inflight shopping, fair & exhibitions etc

So, what is multichannel retailing? Multichannel retailing is a strategy of using more than one channel(listed above) for the retailing activities by a company. So Walmart stores & Walmart.com are part of a multichannel strategy. In India Crome stores, cromaretail.com are part of a multichannel activity.

How to maximize the benefit of multichannel retailing?

A multichannel strategy is not just about representing a company in maximum number of retail channels, it is about a choosing a mix of channels, having a strategy for each one of them as well as an overall multichannel strategy.

To explain this further: Fastrack is a youthful funky brand, this makes it mandatory for the brand to have a dominant online presence. The company does this effectively through fastrack.in as well as a significant online marketing budget. While the online presence is used for creating excitement and to offer the widest possible range of products, the bulk of the sale will still happen through the physical stores. This mix of online & offline presence works well for the company. The online presence also ensures that people in remote locations can also buy company’s products with ease.

Now some other good fit examples could be:

-          A (school) dress material company to focus on school as well as physical store channels.

-          Executive notebooks companies will do well to have a mix of in-flight, online, coffee shop & physical store channel mix.

So as you see, it is the products that the company makes, the target customers and their behavioral patterns that should dictate a company’s multi-channel retail strategy.

 

 

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