Basic Marketing: A Global Managerial Approach

Perreault−McCarthy: Basic
Marketing: A
Global−Managerial
Approach, 14/e

13. Retailers, Wholesalers
    and Their Strategy
    Planning

Text © The McGraw−Hill

Companies, 2002

It’s still in its infancy

Both of these views make some sense, yet they are incomplete and probably mis-

leading. The fact is that almost alltypes of retailers are now establishing a presence

on the Internet. It has the potential over time to dramatically reshape many aspects

of retail selling. So rather than just treat it as a new way that some types of retail-

ers are incrementally varying their old strategies, let’s look at it in terms of what it

is likely to become—something that is reallydifferent.

Despite all the attention, Internet retailing is still in the early growth stages. On

the one hand, Internet usage continues to rise and consumer e-commerce sales have

grown at an exceptionally fast rate. In 1997, consumers spent about $2.7 billion on

the Internet. To put that in perspective, it took about 3 percent of Wal-Mart’s stores

to rack up the same sales. By 2001 that number leaped to about $144 billion. But

don’t confuse growth or the “big bang” that the Internet may have on retailing and

consumer shopping behavior with the reality of its immediate economic impact on

the retail system. So far, all of that spending is less than 5 percent of retailing sales

dollars. Further, the numbers are as high as they are because a lot of expensive com-

puter equipment has been sold that way. So in absolute dollars, retailing on the

Internet is in its infancy. However, it has the potential to continue to grow. Tak-

ing these two vantage points in combination, it’s useful to consider what’s different

about it today and how it will evolve. See Exhibit 13-2.

Stripped to its essence, the Internet dramatically lowers the cost of communica-

tion while making it faster. So it can radically alter activities that depend on the

flow of information. The Internet has produced the biggest gains in businesses where

better information results in more efficient restructuring of tasks. As we discussed

in Chapter 7, that’s what happens in much online B2B e-commerce. On the other

hand, Place decisions for consumer markets need to deal with the challenge of han-

dling truckloads of products and getting them to the consumer’splace. Much of the

investment in Internet retailing systems has been directed toward moving informa-

tion (like orders), not physical goods. It takes, for example, about $15 to $25 million

to build a world-class website for consumer e-commerce. But it costs about $150

million to build a distribution center and systems to support a large-scale consumer

Web operation. Therefore, much of the attention so far has been on the “front door”

Exhibit 13-2 Some Illustrative Differences between Online and In-Store Shopping

Characteristics Online Shopping In-Store Shopping

Customer characteristics Younger, better educated, more upscale Cross section; depends on store

Day-of-week emphasis Higher percent of purchases during Higher percent of purchases on

weekdays the weekend

Customer service Weak but improving Varies, but usually better than

online

Products purchased More emphasis on one-time purchases More emphasis on routine

purchases

Availability of product Not available for inspection or Usually available for inspection

immediate use and immediate use

Comparative information Much more extensive, but Often weak (for example, limited

about products sometimes poorly organized to what is on packages)

Entertainment value A media experience Often a social experience

Charges Product prices often lower, but Product prices and taxes higher,

shipping and handling costly but usually no delivery expense

Shopping hours and Completely flexible if online access Depends on store and available

preparation is available transportation

Moving information

versus moving goods

Retailers, Wholesalers, and Their Strategy Planning 367