The 4 Ps – Place (2/2)
In this lesson, you’re expected to:
– understand how to evaluate a distribution channel’s performance
– learn about the pros and cons of a retail vs. online strategy
A marketing channel’s performance is based on three areas: customer reach, channel operating efficiency and customer service quality.
All three areas must do well to reach the desired levels of sales and profit goals. Similarly, poor performance in any one area causes the overall channel to do poorly.
– if a channel’s performance is poor, the ability to reach customers is inhibited.
– if a channel’s operations are inefficient, the cost of serving its customers will be too high.
– if customer service service quality is poor, customer satisfaction will decrease and customer retention will also decrease.
As we learnt in the previous lesson, a company may have direct and indirect marketing channels to serve its customers.
Usually a direct channel generates higher margins but the channel costs and marketing expenses are higher. E-marketing channels are an example of indirect channels.
Retailers are among the marketing channel intermediaries when they sell a manufacturer’s products at a retail store to customers. The retailer’s goal is to connect producers with consumers at the store for a profit.
Transaction Value for the retailer is derived from a combination of factors such as profitable use of space allocated to a product, inventory turnover and the marketing expenses incurred to promote the product.
The retailer’s goal is to maximize the transaction value, which is affected by the manufacturer’s product quality, market demand, product margin and overall marketing policies.
Manufacturers often carry products in their warehouse and deliver them to the retailer as needed to reduce the retailer’s investment in inventory.
Retail Store vs. Online Store
With the popularity of online shopping, someone with an idea for a new retail business no longer has to open a storefront. That does not mean, however, that there is no longer a need for retail stores or that all business ideas work well online.
If you are looking to open a store, you must consider your product, the consumer and your overall business goals when deciding whether a retail storefront or online store will work best for your business.
In general, opening a business as an online store is much cheaper than a retail storefront. Unlike a retail storefront, there is no rent to pay or other utility bills directly related to the store, except for web hosting and technical support. You do not have to decorate the inside of the store, purchase inside and outside signage or display units. Since you can manage the work yourself, you do not have to hire additional employees.With an online store, your costs are directly related to your website, shipping and accepting online payments. You must pay for your desired domain name and may pay someone to develop your website and e-commerce platform, which can be expensive, but is less expensive than opening a retail storefront.
A study completed by the California Institute of Technology found that consumers pay significantly more for products they can view in person. For high-value items such as designer clothing, jewellery and cars, a retail storefront will appeal more to customers and generate a higher profit margin on individual items.
In addition to the price of items that you can sell, you must consider the number of items you wish to sell. A retail storefront will perform better for a business that sells a select amount of products, while an online store may work better for a business that carries an extensive selection.
With an online business, the amount of instant competition is much greater than with a retail storefront. When you want to open a retail storefront, you can easily survey an area and determine what other stores are selling the products you want to offer or choose to open in a location where those stores do no exist.
Online, there are usually multiple businesses selling the product you offer and many of them are already established, making it difficult for a new start-up to break in and find success. If what you are offering is not unique, then a retail storefront will be more successful.
Building a customer base is one of the most essential components of starting a successful retail business, online or offline.
With a retail store, the potential customer base is limited to the surrounding area. Online, the customer base is vast. Once you open up a retail store, your options for attracting new customers are limited. You are confined to the retail space that you chose and changing logos, signs, shelving and the overall marketing strategy can be expensive. When you work online, you can quickly and easily change the products that you sell and the way you present them on your website.
The ability to sell online has become a critical part of most business’s strategies.It’s apparent that e-commerce won’t be slowing down anytime soon. Not only are more businesses looking to establish online stores but they are also looking to develop their retail stores.
For shoppers, the benefits are plentiful. Shopping online saves time, offers a greater product selection and allows for cost savings in terms of taxes and the price of the product. For retailers, the benefits are equally abundant.
Advantages of E-Commerce Over Traditional Retail
Below are some key advantages of adopting an E-Commerce strategy:
1) Overcome Geographical Limitations
2) Gain New Customers With Search Engine Visibility
3) Lower Costs
4) Locate the Product Quicker
5) Eliminate Travel Time and Cost
6) Provide Comparison Shopping
7) Enable Deals, Bargains, Coupons, and Group Buying
8) Create Targeted Communication
9) Remain Open All the Time
10) Create Markets for Niche Products
Link to the video: https://www.youtube.com/watch?v=BxdfZKnCr8I