The Traditional Way Of Shopping Marketing Essay

In the traditional way of shopping the vendor and the store are very important. The store gives the consumer the possibility to compare, orientate and get information about a product. The physical store and its vendors are therefore very important, because they need to have knowledge, skills, products, and services all at one place. Important factors are the shops location, contacts, and assortment. When a physical store meets these qualifications, it will be successful. But when customers are going to buy products another way the role of the physical store will change, “and that is exactly what is happening in the retail market right now (Molenaar, 2011).” There now is another way to shop, products can now be bought on the internet.

4.1.2.2 E-shopping (online shopping)

As stated in the introduction with advent of internet new possibilities to do business also arose. Doing business over the internet is called Electronic commerce(E-Commerce). Although E-commerce is often indicated as only the purchasing and selling of products or services on the internet, it is far more then only the electronically mediated financial transactions between two parties (Chaffy, 2006). The gathering of information on a product before purchasing it, is also E-commerce (Mokhtarian, 2004). Research done by Mokhtarian (2004) defines three forms of E-commerce:

Business to Business (B2B)

Consumer to Consumer (C2C)

Business to Consumer (B2C)

B2B E-commerce can be seen as the online selling and purchasing of products and services between organizations. The C2C E-commerce is the same as B2B only then between consumers and not organizations. Good examples of C2C are secondhand shopping sites Marktplaats (only in the Netherlands) and Ebay. However in this research the focus will lie on the last form of E-commerce, B2C also known as Electronic retailing or teleshopping (E-shopping). ‘Teleshopping refers to the use of ICT to obtain information about or purchase consumer goods (Mokhtarian, 2004).’

Over the last years E-shopping grew rapidly. Not only the number of purchases but also the frequency. In the Netherlands all online consumer purchases in 2011 increased to 8,98 Billion euro a rise of 9% compared with 2010. On average 7,7 purchases were done per online shopper in 2011 (Thuiswinkel.org, 2011-2). The total number of persons that E-shop In the Netherlands is 9,5 million, which is 79% of the Dutch inhabitants between 12 and 74 years old (CBS, 2011). This is partly due to the growing use of internet by elderly people as stated in paragraph 4.1.2. On average the order was 115 euro in 2011 which was slightly lower than 2010 with 119. The same goes for the average total amount people spend online in 2011, from 888 euro to 885 euro ( Thuiswinkel.org, 2011-2). Even though the numbers slightly dropped, the general believe is that consumers are getting more accustomed to do purchases on the internet and that the rise will continue (Weltevreden, 2007; Thuiswinkel.org, 2012) Another reason for the rise in the future is new technologies like the smartphones and tablets (Molenaar, 2011).

Like mentioned above E-shopping growing, but the form in how to shop online has also changed over the years. Webshops nowadays offer more than just the possibility to purchase a product. The online retailers (E-tailers) are constantly optimizing the experience of their web shops. There are four good e-shopping concepts that try to replace the mirror and want to give the consumer the same feeling as when they go into physical shops.

Augmented Reality: Zugara.com developed Augmented Reality. The consumer faces a webcam, chooses a garment and on the computer screen the product will appear on the body. The customer can take a picture and then take some time to decide. This is a good way for customers to make personal choices (Textilia, 2010).

The virtual fitting room: The company MimicME in Amsterdam developed this application. With this application a visualization of one’s silhouette is made. The consumer needs to fill in his height, weight, waist, bust and then the software calculates the correct measurements and converts it into an virtual model. This model can be used by consumers to see how clothing fits on their body. Customers can see directly whether a garment suits him/her or not (Textilia, 2010).

The virtual catwalk: This way of selling product on the internet is popular. A virtual model in a video walks to the customer and shows the garments. If the customer likes a garment there is a direct link to buy the product. Designer companies like Ralf Lauren and Victor& Rolf are using this technique already (Textilia, 2010).

Mass-customization

The company Styleshake and Indidenim gives consumers the opportunity to design their own clothing. They developed a design tool to do so. The only things that are needed are the measurements of a person. To inspire a customer, creations of other consumers are shown on the site (Bregt, 2010).

Noteworthy is that the these new developments are trying to act as a mirror, to give an indication how the product will fit on a consumers body. But still the product needs to be physically tried on to get the real impression.

4.1.2.3 Physical store shopping vs. E-shopping

The E-consumer strives for convenience, enjoyment and profit. E-retailers and their web shops have other characteristics than physical shops. There are six potential possible advantages of E-shopping with respect to store shopping (Mokhtarian, 2004). These advantages do not apply in all circumstances, it is possible they might occur at the expense of others.

Unlimited selection: A physical store is constrained by the stock that is available at the location. A single internet retailer can offer over a million products, because they can act as a middle man between the producer and the customer. Therefore indirectly the inventory of the producer is available for the consumer. Consequently it is far more likely a consumer will succeed, because all sizes should be available in theory.

Lower prices/ search costs: Theory suggests that internet retailers in general offer a lower price than physical stores. The main reason for this being the lower costs of search for the consumers and the lower costs of market entry and operations (Mokhtarian, 2004). For example the consumer can avoid sales taxes by buying online. In reality this is not always the case. Conferring to research done by Brynjolfsson and Smith (2001) internet consumers do not always choose the lowest-priced item from a E-tailer. Things like habit, brand loyalty and trust in a retailer are also important for internet consumers.

Information: The internet offers the consumer an enormous amount of information about a product. Molenaar (2011) states that this information is not always available in physical stores. Besides most websites offer the ability to compare products with each other and gives a consumer a clear overview.

Personalization: ICT is empowering mass customization of products and information, E-retailers offer the possibility to tailor and personalize their individual demographic and preferences on their websites and products (Mokhtarian, 2004).

Convenience: With E-shopping retailers giving consumers the possibility to shop whenever they want. Online apparel retailer “Zalando” even trumpeted a commercial where people who are naked are shopping on their website. More likely to assume is that it gives consumer the possibility to shop while sitting on the couch after work or late at night. E-shopping makes it possible to shop 24 hours of the day, every day of the year.

Speed: It is a fraction of the time of what it would take to visit a physical store. A consumer can assemble information from various virtual stores about a product and after that the consumer can decide to buy the product.

The six advantages of E-shopping with respect to store shopping discussed above are reasons why consumers want to buy their products online. Even though E-shopping may appear compelling, there are numerous of reasons that make store shopping is just as competitive. There are seven benefits to shop in a store and not online (Mokhtarian, 2004).

Sensory Information: E-shopping does not offer a good substitute for the ability to feel, smell, see, taste, manipulate, try-out, weigh a desired product. In a store it is possible to judge an items size and colour in a natural environment. For apparel these are important factors.

Tangibility: Not the goods are the most important factor, but the shopping environment. Although E-shopping is becoming more popular, not everybody trusts E-shopping (Molenaar, 2011). Therefore lot of people are more comfortable to go physical shopping. Immediate possession: In general store shopping has the advantage of instant satisfaction. Which saves time compared with waiting on a home delivery.

Social interaction: According to Mokhtarian (2004) store shopping can be a deliberate choice to battle isolation. And even if isolation is not a factor she states that many people enjoy the social aspect of physical shopping.

Entertainment: Over the years many researchers have stated that shopping is not only about a maintenance activity, it generally has a recreational undertone ( E.g. Molenaar, 2011; Mokhtarian, 2004; Salomon and Koppelman, 1988; Gould and Golob, 1998). This is the reason inner cities and shopping malls have restaurants, live music performances , carrousel rides et cetera.

Movement: Next to combatting isolation store shopping can meet the need for motion. According to Mokhtarian (2004) it is likely that a number of shopping trips are invented to justify the simple urge to do something and go somewhere.

Trip chaining: Many store shopping trips started as a trip with another purpose. For example working people can stop at a store on their way home from work. Hereby it is possible to keep marginal costs of store shopping low, and it can contribute to make store shopping the most preferred alternative in countless instances (Gould, 1998).

It is difficult to state which sale channel is better, because they both have benefits. A webshop has

numerous of possibilities to provide services. If these services will be appreciated depends per consumer, because personal attention, service and entertainment are important factors to go physical store shopping. Also the kind of retail branch is important in the decision, to purchase goods online of in stores.

4.1.2.4 The new purchasing process

As the previous subparagraph (4.1.1) discussed the consumer anno 2012 has become harder to reach. The consumer wants to be seen as an individual and does not want to be led. The consumer makes his own decisions, therefore it is not shocking that they will choose the sales channel that offers them the most (Poort, 2000). Sales channels being, the internet or a physical store.

No matter what channel is used the purchasing process stays the same. Shopping is often referred to as one simple activity, however in reality shopping is more a process. Shopping for and purchasing products are complex, interdependent activities (Salomon and Koppelman,1988). Numerous of researchers (Salomon and Koppelman,1988; Mokhtarian, 2004; Molenaar, 2011) claim that the purchasing process consists out of five distinct, but possibly overlapping phases;

Entry into the market: the realization that something is needed or the desire to buy something. (awareness)

Choice among alternative shopping modes: what and where can the product be bought. (orientation)

Information gathering: Doing research what possibilities and choices are available. (research)

Evaluation of information obtained: Communication with another person is needed to discuss the product. This can be a colleague, partner or vender. (communication)

Choice of consequent actions: the decision what and where product will be bought and the actual buying of the product. (action)

Even though there are only two sale channels. There are three types of consumers. Strictly internet buyers (E-consumer), strictly physical store buyers and cross channel buyers. Cross channel means that both channels are used to purchase items. Research Of the ABN-AMRO Bank (2011) indicates that cross channel purchases will rise from 35,2 in 2011 to 54,1% of all purchases in 2015. This will be at the expense of strictly store buyers.

The way people will purchase in the future will differ from the classical store purchasing process, were everything is done in a store. The structure of this “New way of shopping” is the same as the classical store purchasing process, only the third and fifth phase differ in elaboration. The information about a product will be gathered on the internet mostly. Depending on the product it is more likely they will be purchased in online web shops. Summarized, the information gathering on products will take place on the internet and the actual manner of purchasing will depend on the consumers preferences. In the diagram below this new way of shopping is illustrated.

Figure . The new way of shopping ( Molenaar, 2011)

4.1.3 Effects on Consumer behaviour

Anno 2012 the consumer has an opinion and wants to be heard. Every consumer is an individual and has specific needs. They want to be treated that way. Nowadays consumers have the feeling that retailers often offer “much of the same”. A consumer wants to feel special, and is seeking for custom made products that are affordable (Pine & Gilmore, 1998). The consumer wants input in the products that a retailer offers. Simplified, the consumer want to feel that the product was created specifically for them (Retail2020, 2010). Mass-production is slowly replaced by mass-customization (Pine & Gilmore, 1998).

The orientation/search behavior of consumers has changed completely with the advent of the internet. The consumer has become a knowledgeable expert and remains up-to-date with both offline (physical stores) and online sources (webshops). Mainly due to the use of social media, forums, blogs and review sites. Future generations of consumers will be fully accustomed to communicate through these channels (Retail2020, 2012). As stated in paragraph 4.1.1 this is resulting in a gap between the ages of 40+ and 20 year olds. Noteworthy, the number of elderly people using the internet is rising. The number of Dutch internet users of the ages 45 till 65 was 90% in 2011 and from the ages 65 till 75, 60% of the people are using the internet (CBS, 2011-December). Not all these elderly people are shopping on the internet, therefore both the new and old media methods are still needed to communicate with consumers.

Another trend is the aging Dutch population. Normally a population is built up in the form of a pyramid with a relatively small group of elderly and a large influx of young people at the bottom. Due to better living conditions and the better healthcare the pyramid is slowly changing, there will be more elderly people. Parallel to this trend is the increase in households, this number is most likely to rise significantly in the upcoming years (CBS, April 2011). Both factors will have an impact on retail, in both supply and demand of products and in personnel (Retail2020, 2010).

The consumer of 2012 lacks time to go shopping and has to handle quick and smart. With stores only open till 18.00 on average a consumer needs to prioritize his needs, because more needs to be done then just shopping (Retail2020, 2010). The internet offers consumers the possibility to shop whenever they like, it offers convenience and speed (Molenaar, 2011). These are a few reasons for the increase in online shop users. With the internet offering consumers these things, the consumer is demanding more from physical stores. They need to offer experience, enjoyment and entertainment in order for a consumer to come. Shopping is becoming more than just purchasing products, it can be seen as a form of leisure. Hospitality, in the form of restaurants, bars et cetera are also becoming more important for consumers while shopping (Poort, 2000).

Nowadays when consumers have the time to go shopping, they are more willing to travel greater distances for the things they want, as a result of his increasing mobility (Weltevreden, 2007). The consumer is extensively searching for identity, authenticity and people like him. Quality, price and service have become preconditions (NRW, 2011).

The current economic stagnation, the problematic real estate market, unemployment, high inflation and high cost are indications that consumers are cautious in the way they are spending their money.

The prospects for the near future indicate that economic growth will be limited and inflation will be high (Syntrus, 2012). This has led to a decrease in consumer confidence and in a consuming decrease (CBS, March 2012). They have become more price conscious and also the quality of life for future generations has become more important to them. They demand from retailers that they deal consciously. They need retailers to be transparent (Retail2020, 2010).

Summarizing, the consumer is becoming smarter, more digitally-connected, price-conscious and more over exploiting multiple shopping channels to get the product they want at the right price (Aubrey et. al, 2012).

4.1.4 Effects on Apparel Retailers

As a result of the current retail trends, the new way of shopping and the changing consumer behaviour retailers are forced to adjust their current way of doing business. This in order to maintain their revenues and market share, but also to enlarge both. The impact of these factors have far-reaching consequences for apparel retail and the retailers(Quix et al., 2011).

The apparel market is changing from a suppliers market into a demanders market and retailers need to adapt to this trend. “The customer is the product (Pine & Gilmore, 1999).” The consumer wants to be heard and wants to be involved in the development of products. Through the help of internet they have become smarter and have more knowledge about products. Therefore apparel retailers need to adapt to their target groups and focus on their customers likes and dislikes, ways of communicating and buying behaviour (Quix et al., 2011). As a result more apparel retailers are using social media in order to gain insight in their feelings about their products and organisation, to involve consumers in the design process and most importantly to use it as a marketing tool (Weltevreden et al., 2010; Molenaar, 2011; Quix et al., 2011).

The consumer anno 2012 has little time to go apparel shopping. Webshops are offering consumers the option to purchase the same products as a store in a relative short amount of time and without the hassle of going to a store. This has influenced the consumers behaviour over the years. Resulting in an increasing number of online purchases each year (thuiswinkel.org, 2011). In combination with economic recession that pressures consumer spending, it is having a troubling effect on the number of visitors that come into a store.

In order to compete with the strictly online retailers, it is of crucial importance that physical retailers develop a webshop and a mobile webshop in the future. Since 2008 the number of (in general) retail webshops increased by 20.000 to a total amount of 37.800 in 2011 (Thuiswinkel.org, 2012). According to Beernink (2011) 46% of Dutch (physical) apparel retailers have an online shop in 2011. Therefore there can be concluded that (apparel) retailers are aware of this trend and are reacting. With the consumer becoming more digital, offline (physical) apparel retailers cannot survive without the usage of the online world and vice versa(Quix et al., 2011). Apparel retailers need to be cross channel active, to survive and to enlarge their market share (ING Bank, 2011).

In addition, apparel retailers need to ask themselves what the added value of their physical store is to their customer (Quix et al., 2011). In order to compete with the online retailers, the physical store needs to offer what the internet cannot. Besides the consumer demand more from the physical stores (paragraph 4.1.3).Since almost every product is available on the internet, physical stores need to add value and create an emotional reaction with their target group, the need to give the consumer an experience. With the constant changing consumer behaviour retailers need to adjust their stores interior and image every five years in order to make them up-to-date and to their customers wishes (Quix et al., 2011).With the trends retailers are faced now, they need to create stores with a homey atmosphere, therefore authenticity is important. (Molenaar, 2009).

Another trend among the larger top apparel brands is that they are developing their own (mono-brand) physical stores (Jones Lang Lasalle, 2010; Textilia, 2012-1). The brands are convinced that they can succeed on their own and offer the customer what they need. They mostly develop flagship stores where they try to give the customer the ultimate shopping experience. These kind of stores try to facilitate a good-looking and relaxed setting where the customer can handle, ask questions, try out and learn to use products and services without the feeling to be under pressure to purchase (Jones et al., 2010). These stores are based on the simple idea of “try before u buy”. In general these kind of stores are very big.

Some retailers are even implementing E-shopping in their stores in order to give the consumer both purchase possibilities and their benefits (Frijters, 2012). This is a trend that is likely to be implemented by apparel retailers in general, because it strengthens the consumer experience by offering the best of both worlds. With this upcoming trend Quix et al. (2011) state that less store square meters are needed in the future cause of less stock and that therefore shops are most likely to get smaller.

An important factor that influence the consumers feeling of a store is the staff. One of the most important factors for consumers is knowledgeable staff and professional advice. The store of the future needs to educate and train their staff in order to give the best service and experience as possible (Fashion united, 2012; Quix et al., 2011).

The main focus of apparel retailers is now on giving the customer an experience and the time of his life (Frijters, 2012). Besides changing stores, inner cities where their stores are housed need to change. They need to become places where entertainment and shopping go hand in hand. In order to make run shopping into fun shopping.

4.1.5 Retail real estate

The consumer behavior has changed a lot over the years. Not only the arrival of webshops combined with the rise in internet purchases, but also because of the sharp fall in consumer confidence. Due to the current economic instability consumers are more cautious to buy new products, resulting in less spending. Effecting the retailers turnover and even causes bankruptcy (FGH Bank, 2012). Combined with the aging of the population and the constant development of new shopping spaces the streetscape has changed over the years (Veenstra, 2012).

Dutch retail real estate market

According to Locatus (2012) on the 1st of January 2012 there are in total 102.783 stores that can be defined as retail selling points which are in use. With a total shopping surface area of 27.813.000sqm.

From the total, 18.382 stores are in use by Apparel retailers with a shopping surface area of 3.169.000sqm (Locatus, 2012). Currently there are 13.988 retail properties vacant in the Netherlands, which is 13,6% of the total amount of retail properties. All vacant retail properties combined are leaving 2.964.000sqm(10,7% of total shopping surface area available) free for usage. The retail property vacancy in the Netherlands is disproportionately distributed over the provinces (Locatus, 2012). The highest vacancy rate can be found in Limburg were 9.6% of all the properties are vacant and the lowest rate is in Noord-Holland with 4.1%.

Over the years the retail property vacancy has increased, according to Locatus (2012) the number of vacant properties has increased with almost 20% over the last two years. The main reasons for this increase are the growing group of elderly, the changing consumer behaviour, the current economic climate and webshops (Zandbergen, 2012). Noteworthy is that the most vacant retail spaces are in local and regional towns and in general not in the larger cities of the Netherlands (FGH Bank, 2012). Now more than ever the location of real estate matters and locations with stores that house not-daily purchase products (like apparel) are going to have a hard time(Weltevreden, 2007).

The A1-, A2- and B1-locations (inner cities) in the 25 largest shopping cities in the Netherlands, responsible for 7500 retail sale points, are doing fine (Zandbergen, 2012). They have the ability to adapt relatively easy to new changes. The high demand of retailers for these locations and the scarcity of vacant properties at these locations make the rents at these locations high (Zandbergen, 2012). Therefore only large retailers can comply with these rents, because they are relatively financially stable (NEPROM, 2012). Resulting in the same streetscape at most of these locations.

For the other retail locations in the Netherlands the situation is different. These locations are less popular and therefore have less visitors and lack retailer impulses(FGH Bank, 2012). The vacancy at these locations is rising (CBRE, 2012).According to Zandbergen (2012) rents at some of these locations dropt with 30% or 40%, in order to gain new retailers. As a result of the declining consumer spending and the development of E-shopping, more over Institutional real estate investors are selling their retail portfolios with weak retail formulas at these locations(DTZ Zadelhoff, 2012; FGH Bank, 2012).

However, not all these B- and C- locations are doomed. The locations that are situated in the larger cities are very important for the main shopping location in the cities. These locations have the potential to grow into an unique shopping area that give the A1 and A2 locations an unique character (DTZ Zadelhoff, 2011). These location will need the perfect balance between fashion and luxury shopping and leisure. The stores need to be small and for starters, specialists and small organizations(DTZ Zadelhoff, 2011). The rents at these locations need to be low in order to achieve this.

In order to fight this rise in vacancy, new building reorientation is needed from the apparel retail market. Retailers not only need to focus on new built properties, it will also be necessary to focus on new buildings in the form of transformation and rezoning. (FGH Bank, 2012). Retail real estate stakeholders (municipalities, retailers, investors, developers et cetera) therefore need to develop a clear vision on how to make shopping spaces and shopping areas more attractive. In order to attract more visitors, resulting in better revenues. Besides, there is sufficient demand for high quality retail real estate with a good location(DTZ Zadelhoff, 2012).

Apparel retailers demand for real estate

With the constant changing consumer behaviour retailers need to adjust their stores interior and image every five years in order to make them up-to-date to the consumers wishes (Quix et al., 2011).With the trends retailers are faced now, they need to create stores with a homey atmosphere, therefore authenticity is important (Molenaar, 2009).

This could be done by creating smaller more intimate stores. Which could lead to a future shift in the demand for retail real estate square meters. Also due to the new way of shopping it is important to the increase future order of products (Quix et al., 2011). This can be achieved by using smaller stocks and by aligning the stock better with the customers demand. As a result products will be in stores for a shorter period of time or not at all. This product reduction could lead to the demand for smaller retail real estate.

Contrary, there is the rise of flagship stores or experience stores. These kind of stores try to facilitate a good-looking and relaxed setting where the customer can handle, ask questions, try out and learn to use products and services without the feeling to be under pressure to purchase (Jones et al., 2010). As stated in previous paragraph (4.1.4) flagship stores are relatively big and can be found at A-location. This could lead to a rising demand for more large high quality retail with a good location.

Also the number of mono-brand stores is likely to increase in the future (PropertyEU, 2012). More strong brands want to create their own stores in the near future. Therefore it is likely that the demand for real estate will rise as well.