Non Store Retailing (E-Retailing)

Any sale happening to the end customer which is not happening through a traditional retail channel or through a physical retail space is known as Non-store retailing. Amazon is a perfect example of Non-store retailing. Amazon does not have its own retail space from where it sells the goods to customers. It directly sells from its website and does not sell via a retail space. Hence, it is known as a Non-Store Retailer.

There are different types of Non-store retailers in the market. Some of the non-store retailers are very popular even today whereas others have died down. Let us make it clear that non-store retailing does not mean an average line of business. In fact, Non-store retailing is rising in importance due to the fact that cost of establishment is very low and all expenses are variable and not fixed. We will discuss the benefits of Non-store retailing in some time.

Types of Non-Store Retailing

• Direct Sales

One of the oldest forms of non-store retailing is the Direct sales type. The best way to describe this would be Door to Door salesmen who do cold calls to homes and offices to sell their products. They might also do other activities like Standees, promotions, and others to directly sell to the end customer.

This type of non-store retailing involves manual involvement and might involve usage of good selling techniques and personal selling skills. A door to door selling is used for selling technical equipment like Air Conditioners, Vacuum cleaners, Water purifiers and others. Even religious books are nowadays sold door to door. The advantage of this technique is that it is a quick closure type of sale. You will close the sale in 1 or maximum two visits.

The direct sale is a type of non-store retailing which is falling in usage. There are only somewhere it is still applicable. FMCG and Consumer durables are using it to some extent but it is almost absent in other industries. One of the reason is the noise in the market due to continuous advertisement because of which customers are irritated. The second is the growing sense of insecurity and the need for privacy due to which many salesmen are not allowed to enter into societies.

Amway, Tupperware and several other multi-level marketing firms actually use direct selling to good effect. They have chains of distributors and end sellers who sell to the end customers. Because the end seller generally knows the end buyer very well, the sale is high and these companies are case studies in the world of direct selling or non-store retailing.

• Direct Marketing

Unlike Direct selling, Direct marketing is on the rise especially since the adoption of the internet. It was initially used in the form of direct mail services where letters and coupons were sent to the end customer. Later on, once internet started, Email marketing was very successfully used where companies spent a huge amount of designing and sending emails to a large number of customers.

After emails, it went to websites and we could see Amazon, eBay, Alibaba and other websites grow and sell products by the truckloads. None of these sellers had a single store. All of it was online. Finally today, we can see that even small businessmen have their online store and a website and they sell their products not only through a physical presence but regularly take part in non-store retailing via social media or via their own websites.

Direct marketing is a segment which is supposed to grow even more over the years. Whatsapp has penetrated the market to a great extent and there are many “Whatsapp stores” opening up where you can get fashion apparels at a good discount. Already Amazon has surpassed Walmart in terms of its valuation and we see more and more online stores rising up. In fact, traditional retail is now afraid of the powers of direct marketing via the internet.

• Automatic Vending

If websites can be used for a large variety of products, then what is the 24×7 salesman for the FMCG sector? Well, it is the Automatic vending machine. If you are right now in your office, you probably have a machine by Café Coffee day or Nescafe which is vending tea or coffee for you. It might be a normal cup of coffee for u, but it is a unit of sale for Nescafe or Café Coffee Day.

Automatic vending machines are being used very smartly in the FMCG segment. We recently wrote an article on the top coffee brands and if you look at that article, you will find brands like Nespresso which are pushing their coffee vending machines into the market because once these vending machines are placed, the sale of coffee to the end customer becomes easier and it is higher in margins because there is no middleman involved.

Similarly, Cold Drink, Newspaper, Beer, Chewing gums, chocolates and even pizza is nowadays sold through an automatic vending machine. These are just straightforward examples of non-store retailing where you don’t need a store of 200 square feet to sell a pizza or cold drinks. Automatic vending has now become a prominent business model in FMCG and is being innovatively adopted in other sectors as well.

Besides the above three type – there is also the use of buying services in the form of a non-store retailer. The best example of this is an existing rate contract between government agencies and a seller who can sell products of a company. Because of the rate contract, the government agencies have to buy only from that seller and only at the given price. The seller, in turn, has to deliver the machine to all locations of the government agency.

However, because buying services as a model of non-store retailing is used very less, and because of the vast penetration of internet in our laptops and smartphones, buying services are now considered almost a part of direct marketing. Because practically everything happens online now.

Benefits of Non-Store retailing

• The cost of establishment is less: The cost of starting a website is always lesser then starting an offline retail outlet.
• Costs are variable in nature: While traditional retail has many fixed costs like rent, salaries etc, the costs of non-store retailing are variable and keep changing.
• Scaling up Is easier: Since the usage of internet for non-store retailing, scaling up of a non-store retailing business is easier than store retailing.

E-tailing Limitations

• Hard to Build Customer Relations

The friendly smile of an employee greeting you as you walk into a retail store can go a long way in building customer relations, helping ensure repeat business. Helpful and knowledgeable interaction with store employees creates confidence with customers. E-tailing lacks the opportunity for face-to-face contact and must try other means to establish long-term relationships with customers.

• Can’t Feel Products

Just looking at a photograph and reading a description of a product may give enough information for a consumer to make a purchase online. Some products, however, need to be held, smelled, touched and listened to in person, making them poor candidates for e-tailing. Musicians, for example, will typically want to play an acoustic guitar before making a purchase, since every guitar has its own unique feel and sound. A person interested in buying speakers for his home stereo may want to listen to them, which can be demonstrated in a retail store but not through an online e-tailer. Deciding on the purchase of a new car is another instance where people are apt to want to smell, sit in and test drive the car.

• Finding Your E-tail Store

In the 1989 movie, “Field Of Dreams,” the theme was, “If you build it, they will come.” Unfortunately, just creating a website does not ensure potential customers will visit your store. A retail store in a shopping mall is almost guaranteed it will get a lot of interest generated by foot traffic. While there are strategic promotional steps an e-tailer can take to try to increase the odds of his site appearing in the results list from a Google search, driving Internet traffic to a site requires a lot of work, with no sure results.

• Additional Costs

E-tailing involves additional costs for purchased items compared to purchases made at brick and mortar stores. Items must be mailed or shipped, incurring not only the additional cost of postage but also for packing materials, which can be significant if items are large or fragile. When items have to be returned, even more postage may be required by the e-tailer for return shipping costs.

• Lack of Consumer Trust and Security

People may have more trust and confidence in dealing with a physical retail store than with an online e-tailer. They know that the store is there, and if they have a problem they know where to go. In contrast, a website might look very impressive, yet the business might simply be a person working part-time with a laptop computer on a kitchen table, who could close the business at any time or simply decide to ignore customers who have complaints. Some consumers might not only be leery of the solidness of an e-tailer but also be hesitant to share credit card and other personal information over the Internet to someone they can’t see.