IT for Management Chapter 8: Omnichannel Retailing, E-commerce, and Mobile Commerce Technology

Introduction to the Dynamic Retail Environment

• Current Retail Landscape: Traditional brick-and-mortar stores are facing increasingly intense competition. Modern consumers are empowered by mobile devices, providing them with more information than ever regarding products, pricing, and alternative shopping locations.

• Showrooming: A specific consumer behavior where individuals visit a physical store to examine merchandise, seek advice from staff, or try on items (like clothing), but ultimately leave the store to purchase the product from an online retailer providing a lower price.

• Challenges for Online Retailers:  - Necessity for ongoing investment in new technologies to enhance the shopping experience.  - Increasing operational and logistical efficiency.  - Maintaining high levels of customer satisfaction.

• Challenges for Mobile Commerce:  - Integration of Artificial Intelligence (AI).  - Implementation of Virtual Reality (VR).  - Development of robust recommendation systems.  - Adoption of new payment system types.

Defining Modern Commerce Channels

• E-commerce (Electronic Commerce): The buying and selling of goods and services on a computer network, specifically the Internet or the World Wide Web.

• M-commerce (Mobile Commerce): The buying and selling of goods and services using mobile devices, such as a smartphone, and a telecommunications or computer network.

• Omnichannel Retailing: A business strategy focused on providing customers with a seamless and integrated experience across multiple retail channels. This includes in-store, online, mobile, and other distribution channels.

• Logistical Infrastructure: The organization of a complex system of facilities, equipment, transportation, and additional requirements needed to deliver goods and services from the point of origin to the point of sale and the final end user.

The Evolution of Retail Strategy

• Single Channel (The Legacy):  - Consumer contact with retailers is limited to a single channel.  - Retailers have only one "touch point" to connect with consumers.

• Multi-Channel (The Reality):  - Customers perceive multiple retail channels available for acquiring goods.  - Retailers operate these channels as independent "silos" that occasionally compete for the same consumer attention.

• Cross-Channel (The Aspiration):  - Customers see multiple but separate channels through which they can interact with the same brand.  - Retailers achieve a single view of the consumer but continue to operate channels as silos.

• Omni-Channel (Nirvana):  - Customers enjoy an integrated, value-added experience with the brand across multiple channels.  - Retailers leverage the functionality of each channel and a single view of the customer to provide an optimal overall experience.

Consumer Demands and Convenience Models

• Buying Decision Factors: Retail shoppers prioritize price, product selection, and convenience as the most important factors.

• Defining Convenience:  - Being able to find a specific product without extensive searching.  - Ease of picking up or returning a product with little or no hassle.  - Seamless checkout or purchase processes.

• Marketing Tactics for Convenience:  - Same-day delivery.  - Buy online, pick-up in-store (BOPIS).  - Curbside delivery.

• New Retail Business Models:  - Subscription-based retailing.  - Fulfillment as a Service (FaaS).  - Online marketplaces.  - Web and cloud services.

Subscription-Based Retailing Examples

• Amazon: Product Category: General retail. Amazon Prime members save money by ordering products on a recurring schedule (e.g., monthly delivery of coffee).

• Target: Product Category: Infant clothing. Customers subscribe to "Cat & Jack" private label boxes for the price of $\$40.00$ based on baby gender and age; items can be returned to stores or by mail.

• Boxed: Product Category: Grocery, snacks, personal care. Through the "Boxed Up" service, for an annual fee of $\$49.00$, customers get free shipping on bulk orders and $2.00\,\%$ cash rewards.

• Stitch Fix: Product Category: Casual fashion. Subscribers submit size and price information, receive clothing to try on, and return unwanted items using a prepaid envelope.

• Birch Box: Product Category: Bath and beauty. Monthly boxes of personalized cosmetic and hair care samples based on user-submitted info.

• My First Reading Club: Product Category: Children's books. Monthly boxes containing $3$ to $4$ age-appropriate books.

• Hungry Root: Product Category: Vegan meals. Periodic shipments of ingredients for cooking various vegan meals.

In-Store Technology and the Shopping Experience

• Technological Advances:  - Web Technologies: APIs, semantic search technology, Digital Voice Assistants (DVAs), and recommendation systems.  - Mobile Technologies: Growth of $5G$ networks.  - Social Commerce: Social networking services acting as retailing platforms.

• Traditional Retailer Advantages:  - Utilizing empowered employees.  - Serving as a critical "node" in the supply chain.  - Optimizing shopping history data.

• Specific In-Store Enhancements:  - Free In-Store Wi-Fi to support shoppers using mobile devices.  - Autonomous Shopping Carts: Carts that navigate or follow shoppers.  - Nike Speed Shop: A localized service model for quick access to popular items.  - Digital Displays: Increased use of screens for information and marketing.  - Novel Payment Systems: Innovative ways to facilitate transactions.

• Experiential Shopping: Shifting the store's focus from mere transactions to provide a unique physical experience.

E-Commerce Market Categories

• Business to Consumer (B2C):  - Pure Play Retailers: Organizations that operate exclusively online without physical store channels.  - Omnichannel Opportunities: Arise when retailers operate across both e-commerce and store-based channels.  - Market Trends: Mass personalization, AI applications, recommendation systems, A/B testing of tactics, and the use of DVAs.

• Top 10 US E-commerce Retailers (Market Share 2020):  - Amazon: $38.70\,\%$  - Walmart: $5.30\,\%$  - eBay: $4.70\,\%$  - Apple: $3.70\,\%$  - The Home Depot: $1.70\,\%$  - Wayfair: $1.50\,\%$  - Best Buy: $1.30\,\%$  - Costco: $1.20\,\%$  - Target: $1.20\,\%$  - Macy's: $1.10\,\%$

• Direct-to-Consumer (D2C): Businesses shipping products directly to consumers bypassing wholesalers (e.g., Dollar Shave Club, Warby Parker).

• Peer-to-Peer (P2P): Exchanges between two individuals (e.g., eBay, Craigslist).

Business-to-Business (B2B) E-commerce and E-procurement

• B2B Overview: Markets where transactions involve only organizations. Projected to reach $\$1.8\,\text{trillion}$ and account for $17.00\,\%$ of all B2B sales in the US by $2023$.

• B2B Business Models:  - Sell-side Marketplaces: Direct (buyer visits a single seller's site) or Marketplace (multiple companies' products on one operator's platform, e.g., Amazon Business, Alibaba).  - E-sourcing (Buy-side Marketplace): Identifying, evaluating, and selecting suppliers via online auctions, Request for Quotes (RFQ), and private exchanges.

• E-procurement: Reengineered corporate purchasing using e-business technologies.  - Direct Procurement: Materials for producing finished goods.  - Indirect Procurement: Materials for daily operations.

• E-procurement Goals: Control costs and simplify processes by streamlining the value chain and aligning with virtual supply chain partners.

Challenges and Strategic Planning in E-commerce

• Channel Conflict: Conflict between online and physical selling channels. This may lead companies to limit online direct sales or restructure distributor relationships.

• Click-and-Mortar Internal Conflict: Arises when an established company's online division competes with its offline operations regarding pricing, resource allocation, and logistics (e.g., handling online returns in-store).

• Strategic Planning Recommendations:  - Build marketing plans around the customer, not products.  - Monitor one-year visions and remain agile for adjustments.  - Identify and test key assumptions; adjust when assumptions prove wrong.  - Utilize data-driven, fact-based decision-making.

Mobile Commerce (M-Commerce) and Marketing

• Mobile Retail vs. Marketing:  - Mobile Retailing: Using technology to enhance the in-store experience.  - Mobile Marketing: engaging consumers over Wi-Fi/networks via handheld devices.

• Mobile Advertising:  - In-app advertisements (often supporting "free" versions of apps).  - Location-based Advertisements: Pushed to home screens or texts based on proximity criteria.

• Strategic Information: Tracking how customers move through stores to create optimal layouts and understand preferences using smartphone signals.

• Quick Response (QR) Codes: Links to webpages; popular in Asia but faces lower adoption in the US due to lack of user knowledge.

Mobile Services and Entertainment

• Mobile Entertainment: Apps for music, movies, videos, sports (tracking scores/athletes), and exercise (recording heart rates/workouts).

• Mobile Gambling: Expected to grow, with predictions suggesting it could generate $\$20.00\,\text{billion}$ soon.

• Travel Services:  - Google Maps is a primary tool for travelers.  - Apps for flight information (SMS or in-app), voice translation, and finding Wi-Fi hotspots.  - Hotel chains provide in-room wireless and specialized management apps.

• Social Networking: Sites like Facebook have integrated mobile access; Snapchat is entirely app-based.

Mobile Payment and Financial Services

• Payment Systems:  - Charge to Phone Bill: Uses services like Boku; charges are added to the telecom bill.  - Near-Field Communication (NFC): Transferring payment by tapping or passing a phone near a terminal.  - Mobile Wallets: Apps opened via password/fingerprint that use NFC to transmit credit card data.  - QR Code Systems: Retailers scan a code generated on the user's phone.  - Mobile Card Readers: Physical devices attached to phones for swiping (e.g., Square, PayPal).  - SMS and Secure Screens: Payments initiated via text link to secure processing pages.

• Mobile Banking: Performing banking activities via handheld devices.  - Methods: Customized apps or SMS using Short Codes (5-6 character numbers).  - Services: Bill payments, transfers, check deposits, and balance inquiries.

Security Risks in Mobile Banking

• Cloning: Duplicating a phone's Electronic Serial Number (ESM) to a second phone to bill transactions to the original owner.

• Phishing: Fraudulent communication (email) to trick users into giving up credentials.

• Smishing: Phishing conducted specifically via SMS.

• Vishing: Phishing conducted via voice or voicemail.

• Lost or Stolen Phones: Direct unauthorized access to financial transactions if the device is lost.

Questions & Discussion

• Factors influencing behavior: What three factors most influence consumer shopping behavior?

• Convenience examples: List things retailers do to increase convenience (online or in-store).

• Technology as a double-edged sword: Why is technology seen as both a blessing and a curse by retailers?

• Subscription-based retailing: What is it, and what are some company examples?

• Omnichannel experience: Why does it provide a better experience for consumers?

• Innovation criteria: What performance areas should managers expect innovations to improve (e.g., in the Nike Speed Shop model)?

• Experiential retail: What examples appeal to younger shoppers (late teens/early 20s)?

• Wi-Fi utility: Why provide free in-store Wi-Fi given modern shopping habits?

• Convenience focus: Why is convenience the most important factor to focus on over price and product?

• Marketplace differences: Explain the differences between various e-commerce marketplaces.

• Channel conflict causes: Why does conflict occur between traditional and online channels?

• Personalization challenges: What are the challenges of using personalization/customization, and how is transparency increased?

• Improving UX: Describe new technologies used by retailers to improve user experience.

• Mobile usage trends: How are people using mobile devices for shopping and how can brick-and-mortar stores enhance this?

• Entertainment & Travel: List mobile apps available for entertainment and the ways travelers use mobile technology.

• QR Code Popularity: Why are QR codes less popular in the US than in Asia?

• Mobile Gaming ads: Why is the mobile gaming market lucrative for advertisers?

• E-wallet adoption: Why haven't e-wallets been widely adopted and what is needed to change this?

• Banking details: What are the most common mobile banking activities and their associated security risks?

• Micropayments: What is a micropayment and why is it beneficial?