A Critical Evaluation Of Multi-Channel Retailing In The Uk Today

Contents

1.0 The current retail environment

3

1.1 Pestel Factors

5

1.2 Porters 5 Forces Analysis

6

2.1 Successful Multi-Channel Retailers

9

2.2 Success Stories

10

2.3 Channels Working Together

11

3.0 Important aspects of being a Multi-Channel Retailer

13

3.2 The right Channel for the right Company

14

3.1 The Target Customer

17

4.0 Conclusion

18

5.0 Referencing

19

5.1 Bibliography

20

1.0 The current multi-channel environment

A report by the Information Technology consultancy company Chateris recently cited the most popular four retail channels in the UK (See Figure 1, below). These included the internet which dominates sales channel for retailers at the moment (Chateris, UK Multi-Channel Retailing Report, 2006) . The internet is followed closely by stores. Also important are call centers and catalogues. There are three other sales channels used now, of which in-store kiosks are currently the most important for retailers, with many retailers planning to use them in the future. M-commerce (the use of mobile phones for selling and promotions) is predicted to have sizable growth in the future as is selling via Digital Television. Multi-channel retailing is already fairly complex, with up to four of the most popular sales channels used by many retailers. In the future customers are likely to be offered even more choice when the newer sales channels, such as m-commerce, kiosks and digital TV become more widespread.

Figure 1: Sales Channels in use in the UK 2006

(Chateris, UK Multi-Channel Retailing Report, 2006) .

According to Richard Howlay (Online Retail Comes of Age (again), 2006) the UK was found to have the most advanced range of products and services available on the internet with 26,000 different companies trading online in the UK. Amazon UK was the most visited UK online retailer. Dell was number two closely followed by UK brands Tesco and Argos.

From the customers' perspective, having the option to shop via catalogue, in-store or online represents more choice and available information, as well as the ability to order 365 days a year. They should be able to place an order online at midnight, call a free number for customer service during the week, and return merchandise purchased online at the store.

1.2 Factors Affecting the Multi-Channel Environment

For retailers, today's economy has brought many obstacles as well as opportunities. Consolidation and globalisation have reduced margins. (Jeffrey Bennett, Porter's 5 Forces Model and Internet, 2006) . Increased competition has forced retailers to implement greater discounts and to develop more innovative product offerings. Shoppers, too, have changed. They expect better selections, lower prices, and instant service and they will stop shopping at retailers that cannot deliver. In this difficult new environment, the traditional conventions of retailing are changing.

The idea of a single retail channel is no longer accepted. Traditionally, retailers approached customers through one dominant channel. But today, to effectively build your customer base, retailers must become experts in synchronizing operations across multiple retail channels in order to satisfy the increasingly knowledgeable and increasingly disloyal customer.

1.2 Porters 5 Forces Analysis

According to Porter's Five Forces Model, competition has most likely increased overall as a result of emerging channels, particularly e-Commerce. (Jeffrey Bennett, Porter's 5 Forces Model and Internet, 2006) . The internet and IT has made it possible to both focus on the top and bottom lines and market share is expanded and costs are cut. Many products and services exist solely online, major companies have gone online to successfully supplement the physical experience.

Buyer power is higher when buyers have more choices. Businesses are forced to add value to their products and services to get loyalty. Many loyalty programmes include excellent services that customers demand online. Customers want to solve their problems and many times they are more successful online than on-phone. Also, internet confident businesses are offering more valuable goods and services at lower costs. Now with the advent of eBay, many people are assuming the role of seller, shipping merchandise directly to the individual eliminating the need for a physical store. Individuals can have a successful business selling goods of larger companies without having to carry stock.

Supplier power is higher when buyers have fewer choices as to what they can buy. As mentioned previously the amount of suppliers has increased. All an individual has to do is form and agreement to sell products for the company. Customers can allow a webmaster such as Amazon to earn money by recommending products from others. This increases supplier offerings.

Threat of substitute products or services is high when there are many product alternatives. The internet allows this as the customer can substitute their product by purchasing from companies overseas where labour, services or products can be cheaper, but of comparable quality.

Threat of new entrants is high when it is easy for new competition to enter the market and now smaller businesses can start up on the internet for little money and make a lot of money. Rivalry among competitors is high when competition is more intense within industries and additional channels can intensify. Online book shops and catalogue companies are a good example. Amazon.com and borders.com are very competitive. However, there are many smaller niche bookstores that when combined take