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Traditional Retailing and Non-Store Retailing

A Basic Tutorial on Retailing and Merchandising via the Internet

As can be readily seen above, the visual impact of the Internet is astonishing. For marketing merchandise of all types, it has become a tool of unparalleled power and profit. After defining key terms, this tutorial will (1) explore three types of merchandising, (2) provide a description of three specific retail merchandising operations, one of which will be international in scope, (3) include certain performance criteria relating to the three sample retail operations initially described, and (4) analyze the advantages and disadvantages of the Internet as a marketing medium.

RETAILING is the marketing and sale of merchandise which has been purchased in bulk, i.e. wholesale, by a firm for final resale to consumers at a pre-determined profit. A retail outlet often provides personal service, counsel, and customer assistance to "justify" the increased price which enables the firm to remain financially solvent. Most retail outlets operate in a physically identifiable location: for example a tobacco outlet, a shopping mall, or an established boutique, such as a commercial art gallery. All of these businesses utilize the Internet to promote sales and interest in their respective services.

NON-STORE RETAILING involves the sale of merchandise through catalogues (International Male, L.L. Bean), consumer distribution networks (Amway, Avon) or postal, publicity or telemarketing approaches (e.g. American Red Cross), among other non-structured sales strategies. Internationally, there are also many non-store operations. among which can be found, for example, Yacht Brokerage which publishes Web Pages in French, and other languages.

MERCHANDISING reflects all of the activities of the retail merchant, principally the turn-over of in-house inventory, promotion of the retail outlet itself, sourcing, supplier-retailer interaction and customer service. Merchandising consultancies, sometimes focused on specific lines of products, exist in most major U.S. cities. It might be useful to provide a link to one such firm: Jewelry Merchandising Center This Center provides dynamic information concerning Internet use by diamond and other jewelry firms. Deep in their extensive site, for example, they point out that Infoseek, lists almost 120,000 references to diamonds and diamond merchants in its data bank.

The FIRST TYPE of merchandising involves direct in-store sales. This is the most traditional and well-known method of providing goods and services to the public at reasonable retail prices, frequently with personalized service and advice.

The SECOND TYPE of merchandising includes the sale of merchandise on a non-personal basis, through mail-order houses, catalogues, telemarketing or other non-store strategies. Costs of overhead are minimized and savings are usually passed on to consumers in the form of standard discounts. In spite of the discounts, however, this is still considered a retail type of merchandising.

The THIRD TYPE of merchandising reflects a combination of the non-personal approach and cyber-technology. Firms operating across international borders often use this approach, marketing and promoting their goods and services via the Internet, E-Mail and a variety of net-based technologies.

THREE DIFFERENTIATED RETAIL OPERATIONS USING THE INTERNET

THE TRADITIONAL RETAIL FOOD OUTLET is an excellent example of a simple business utilizing the advanced technologies of today to increase and promote its business, not only by generating customers in its local area, but by disseminating information over a wider area, often involving several states or major urban markets. Potential customers, having seen the restaurant on the Internet, perhaps by link to a Chamber of Commerce site, will have a pre-established, conscious awareness of the restaurant's quality, specialty dishes and location, prior to visiting the town where it is located.

in Myrtle Beach (South Carolina) enjoys a fine reputation as a gourmet establishment, offering European Cuisine to discriminating customers. Their Internet Link provides a tantalizing Menu, an attractive photograph, and a list of locally competing restaurants to attract a broader customer base to their area. The atmosphere of their restaurant is communicated to the viewer through the use of soft brown tones and subdued wording, indicative of high-quality and conservative surroundings.

THE MAIL-ORDER OR CATALOGUE OPERATION is typified, perhaps, by L.L. Bean, a phenomenally successful business, according to the Hoover evaluating service. Although L.L. Bean has a home-based retail outlet, the vast majority of their business is conducted by catalogue sales, a reasonable percentage of which is reportedly generated by the Internet. Their 24 annual catalogues cover a wide variety of sports equipment, outdoor clothing and camping gear. Although they use FAX machines, media advertising and traditional catalogue sales approaches, their use of the Internet is reported to be expanding.

Incidentally, the Hoover Company Profile Service is of great use in assessing the relative success of major catalogue and mail-order based firms. On the basis of comparative data, the consumer can form objective and fairly valid judgments and opinions as to cost, availability and quality of a diverse range of products. "Integrity" is also referred to in the Hoover summaries, and an extensive history of the enterprise under analysis is provided.

CYBER-SOPHISTICATED INTERNATIONAL FIRMS comprise the third type of merchandisers. The Hymex Diamond Corporation of Guinea, West Africa serves as a prime example of this type of firm. It mines, evaluates and cuts diamonds for marketing on a world-wide basis, and publicizes its successes through the Internet. Hymex raises capital for further exploration and diversification of its activities using the Internet to attract investors. It publishes its production figures and presents technical findings related to its various mineral operations. In so doing, it generates interest in diamonds and enhances the investment climate in this lucrative field.

COMPARATIVE PERFORMANCE CRITERIA

The TRADITIONAL RETAIL OPERATION, such as Chestnut Hill Restaurant in South Carolina, increases its "performance", defined as meals served per month, and its public exposure on the Internet by interlinking with:

* Restaurant Association Pages *

* Search Engines *

* Chambers of Commerce *

* Tourist Agencies *

The Internet generates enhanced business, transmits vivid images of the restaurant's ambiance, and furnishes the means to click hyperlinked menus and additional images. It has been estimated in journals such as Consumer Reports that, for every thirty "hits" on a given Web Page, perhaps one sale is actually registered. There are no reliable data published as of this date concerning increased restaurant patronage, although the obvious interest of establishments like Chestnut Hill is a favorable indication of the appeal and the potential of the Internet within the food industry.

MAIL-ORDER and CATALOGUE OPERATIONS have been enjoying improved business as a result of pubicizing their goods and services on the Internet. The Hoover Company Profile Service indicates that L.L. Bean, for example, has 8 factory stores in the United States and 11 in Japan. They market over 15,000 different items and have improved their sales through the Internet. Precise data are confidential; however, L.L. Bean has found this medium not only to be profitable, but also capable of expanding awareness of Brand Name and Corporate Image. Some indications of L.L. Bean's success with the Internet are their enthusiastic use of:

* Catalogue Order Forms *

* Attractive On-Screen Company Images and Promotional Displays *

* The Colors Brown and Green, to Enhance Their Pro-Ecological Orientation *

* Their Relatively High-Visibility on the Internet *

Although this company began its operations modestly in the State of Maine, it has expanded exponentially in recent years. Performance of L.L. Bean has been clearly enhanced through use of electronic media, inclusive of the Internet.

CYBER-SOPHISTICATED INTERNATIONAL FIRMS, such as Hymex Diamond Corporation and America Mineral Fields have actively capitalized on the availability and usefulness of the Internet to perform the following crucial functions:

* Cope with Adverse Developments, through Astute Public Relations Strategies *

* Attract Investors to Capitalize their Operations *

* Publicize Their Successful Mining Operations *

* Provide Technical Information for Down-Line Customers and Purchasers of their Mineral Products *

The international operations of both Hymex Diamond Corporation and America Mineral Fields definitely benefit through Internet publicity and exposure in these ways, and in others. By establishing an image of competency and professionalism in cyberspace, large firms can increase public interest in and awareness of their products and services. Performance criteria (profit, market-share and customer-base, in particular) of these large companies are clearly improved through judicious and proper use of this medium.

ADVANTAGES OF MERCHANDISING ON THE INTERNET

* Dynamic Communication of Corporate Image *

* Visual Impact through Action Icons and Logos *

* Brings Point of Sale to Your Very Living Room *

* International and Multicultural Communication Capability *

* Growing PC Ownership Increases Exposure to Internet Marketing *

* Credit Cards and Cyber-Banking is Becoming Increasingly Popular *

DISADVANTAGES OF MERCHANDISING ON THE INTERNET

* Not Everyone Has Access to a Computer *

* The Internet is Not a "Secure" Link *

* The Internet is an Impersonal Medium *

* Unquantifiable Results of Internet Sales *

* Customer Satisfaction and Customer Service are Potentially Compromised *

* Magnitude of Information on the Internet Obstructs Effective and Rapid Transactions *

TUTORIAL QUESTIONS

1. Amway Corporation is primarily an example of:

(a) a telemarketing firm

(b) a traditional retail outlet

(c) a consumer distribution network

(d) an international production facility

2. Cyber-Technology can be adapted for profitable use by:

(a) Retail Firms Operating in a Circumscribed Area

(b) International Firms Marketing Products World-Wide

(c) Mail-Order and Cataloguing Operations Nation-Wide

(d) All of the Above

3. The Hoover Company and the Jewelry Merchandising Center share a common objective because they:

(a) Provide quality products which result in customer satisfaction.

(b) Disseminate statistical data pertaining to mining operations overseas.

(c) Furnish valuable information enabling customers to select reliable merchants.

(d) None of the Above

4. The Internet is used by which of the following firms to achieve these four objectives: (i) Cope with Adverse Developments, through Astute Public Relations Strategies; (ii) Attract Investors to Capitalize their Operations; (iii) Publicize Their Successful Operations; (iv) Provide Technical Information for Down-Line Customers and Purchasers of their Products?

(a) United Way and Red Cross

(b) International Male and L.L. Bean

(c) Hymex Corporationa and America Mineral Fields

(d) Chestnut Hill Restaurant and Myrtle Beach Tourist Association

5. "Retailing" has been defined essentially as:

(a) displaying merchandise attractively to enhance sales

(b) interacting with suppliers at the lowest cost

(c) the sale of wholesale goods to final consumers at a profit

(d) publicizing and merchandising quality goods via the Internet

Answers: (1) c (2) d (3) c (4) c (5) c

This Merchandising Tutorial has Been Provided by New Mexico State University Marketing Students in conjunction with TRANSNATIONAL RESEARCH ASSOCIATES for Instructional Use by the General Business Community.