Sales Channel Comparison
Consumer Channel (Lands’ End)
Land’s End is a world leader in multi-channel retailing and multi-channel management, selling online, over the telephone, through its own stores, affiliate stores and through Sears’ larger retail outlets. Sears Holdings acquired Lands’ End in 2001 and has since then continually integrated the company’s products into the Sears selling channels as well. The core focus of the company from a product standpoint is casual and customizable clothing for men, women and children including infants. In addition, the company also sells many accessory items including handbags, travel accessories and weather-related personal products. Another part of the company’s channel are its 15 different Inlet and NQP-branded stores operating in Illinois, Minnesota, New York and Wisconsin. The company has made many horizontal marketing system decisions including expanded into Land’s End School and Land’s End Business Outfitter, in addition to Land’s End International. This last venture moved the company into Japan, Germany and the UK.
Land’s End initial business was just catalog sales, and realizing that there were many competitors each with comparable business models, the founders of the company chose to offer customized items and a lifetime guarantee on every item sold (Dickinson, 2009). Land’s End first went online in 1995, during a time when many dot coms were just getting financing and jumping into online retailing. What differentiated Land’s End during this time was their focus on taking the outstanding customer service they had in the catalog operations and carefully automating it to the Internet to retain that aspect of their business model as a competitive advantage (Dickinson, 2009). The strategy worked, and through that effort, Land’s End realized that optimizing the back-end systems including logistics, supply chain management and build-to-order strategies first made selling much more reliable and profitable. Another key lesson learned from concentrating on the back-office systems was the impact the higher levels of system performance and consistency of user experience delivered across all channels greatly increased customer satisfaction (Abdinnour-Helm, Chaparro, Farmer, 2005). What Land’s End realized was that having an enterprise-wide order management, supply chain, pricing and logistics system that could serve all distribution channels in real time with the same data and performance was a major competitive advantage (Dickinson, 2009).
Another aspect of this enterprise-wide approach to managing order capture, processing and management was that the customer mix of the company began to change. Where before the company had attracted the value-based shopper, the brand’s image began to change and more upscale customers were purchasing their products online and through stores (Pitta, 2002). The company had in the early stages of their Internet-based selling strategies concentrated on giving customers visibility into the status of their orders and standing behind their products with a full, lifetime guarantee (Morganosky, Fernie, 1999). As Land’s End moved more into e-commerce, mobile-based marketing campaigns and focused on creating a unique multichannel experience where the customer would get the same response no matter what channel they interacted with, the per capita income and spending levels began to increase as well (Dickinson, 2009). Land’s End had orchestrated their multichannel selling strategy so well that they were entered entirely new markets purely based on tapping into how different people wanted to buy. This also drove the development of entirely new product lines, channel strategies and the build-out of their horizontal marketing-based strategies that act as a framework for attracting new customers continually as well.
Land’s End insight into building out their back-office systems including order capture, processing, management and fulfillment, then integrating these systems to pricing set the foundation for a highly effective training strategy for each channel as well (Dickinson, 2009). By having systems in place that can deliver identical responses to a customer regardless of what channel they choose to buy from, Land’s End has been able to construct training systems that can be tailored to the needs of each channel yet provide the same data. This approach to training and development within each of their channels is a best practice many retailers aspire to yet few accomplish (Gu, Kim, Tse, Wang, 2010). Ultimately, the value of any channel training program is in its ability to get the most complex information to the pre-sales and sales teams as quickly as possible with the added focus on why it matters to their selling efforts. Lands’ End does multichannel selling training to show each channel partner and member of one channel how their efforts make a big difference across all channels. This way, Lands’ End gets each member of each channel to own their role and look to close the sale and earn the profits from them. Thiers is the most cohesive, well-orchestrated multichannel training program there is in consumer retailing.
PART 2: Industrial Channel
General Electric is one of the most diversified and successful conglomerates in the Fortune 100 with market leadership in aircraft engines, household appliances, lighting products and services, medical products and imaging, power generation and water processing products. The company has successfully created a credit services subsidiary, operating in consumer and commercial financing sectors, media content and industrial products globally. Each of these businesses force the company to have one of the most efficient and profitable supply chains of any industrial products manufacturer and service provider (Walters, 2008). GE currently employs 304,000 globally and had revenues of $156B as of the end of their latest fiscal year ending December 2009. Revenue increased 14.1% from 2008 while operating profit dropped 24.1% in the comparable period. This drop in revenue as attributed currency fluctuations and the weakening dollar globally.
GE sells into many different Business-to-Business (B2B) markets and in a few Business-to-Consumer (B2C) markets, yet the channel conflicts they face are primarily in the former. The complexity of selling through B2B channels to the government force a higher level of complexity into their selling strategies as well. The GE supply chain needs to be in compliance to the government reporting and audit requirements to meet their purchasing specifications (Walters, 2008). The U.S. government also demands to know how and where GE ships its most advanced technologies, as they must be monitored in the national security interest. This places many more costs and constraints on GE, all prerequisites for selling to the U.S. government, one of their largest customers across all product divisions based on an analysis of their latest annual reports. The government also requires supply chain visibility several layers into the GE operations so they can determine the quality and conformity to standards of the products they buy (Aggarwal, Ganeshan, 2007). All of these factors have led GE to create specific divisions who focus just on government compliance and the monitoring of their own supply chains, sourcing and pr9oduction operations to ensure compliance to government standards.
B2B e-commerce in the commercial sector for GE is equally complex as many product divisions sell through several channels concurrently. This leads to the need for having unique, well — defined processes to support special pricing, product customization and to-order requirements (BusinessWeek, 2002). It also requires GE to have a much more synchronized approach to product development and new product introductions, as the B2B sales cycles are inherently longer, more complex, and involve far more departments and divisions. A new product launched through distribution channels takes an exceptional level of coordination and focus to ensure its success, as suppliers must be coordinated with and demand planning for production accurately communicated (Aggarwal, Ganeshan, 2007). The B2B e-commerce initiatives, strategies and programs that GE relies on each have their own unique role in the overarching strategic plans as well. A case in point is how GE will often rely on its indirect channel partners to penetrate entirely new mid-tier markets as they have done with their lighting division in France for example competing against Phillips, a state-subsidized competitor (BusinessWeek, 2002), GE was successful in moving into France precisely because it relied on its channel partners to create the necessary relationships with key partners in the mid-tier of the market. The larger, French-based competitors ignored this segment.
As GE is so dominant in the B2B markets it competes in, the integration of channel management, online ordering, pricing and logistics systems is also critical for its success. The demand driven strategies of industrial manufacturers is directly dependent on the level of successful integration to logistics systems (Walters, 2008). GE has created a cohesive demand driven supply network that interlinks their e-commerce, manufacturing, production planning and logistics systems to ensure the highest levels of efficiency possible (Etzion, Pinker, 2008).
PART 3: Why everyone Loves Costco
The allure of Costco is the breadth of product selection combined with the pricing that motivates consumers to buy immediately rather than think about it. The approach Costco uses for supply chain management centers on selective buying of unique, highly differentiated and valuable products that are not easily found anywhere else (Hu, Chuang, 2009). This supply chain strategy assures a reputation over time of having one-of-a-kind types of products and the need for customers to purchase them when they are available in the stores. Costco uses this scarcity concept to motivate customers to buy the high-end furniture and electronics products especially (Hu, Chuang, 2009). All of these factors contribute to the urgency to buy even if a customer doesn’t necessarily need the quantity needed. Costco has this down to a science and can predict across its demographic segments that will buy what level of products and spend how much per trip (Hu, Chuang, 2009). In addition to this approach of scarcity vs. abundance on product selections, the company is a heavy user of the customer experience for marketing. The pervasive use of samples throughout the stores is a case in point (Wu, 2010).
The cost of a yearly membership is worth it. The coupons and deals deliver a good return on investment and the special offers on clothing are very good. Shopping for larger, more expensive items can be quickly turned into an impulse buy as Costco cycles through unique, highly differentiated products precisely for the purpose of driving impulse buys of their most expensive products.
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(Etzion, Pinker, 2008)
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