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Factors that Affect the Strategic Choice of Sales Channels

A Study of the Swedish Clothing Retail Industry

Written by D. Biörck, T. Thomasson

Paper category

Master Thesis

Subject

Business Administration>Marketing & Sales

Year

2014

Abstract

Thesis: Determine the factors that affect the choice of sales channels In the following paragraphs, we aim to explain the factors that affect the company's choice of sales channels based on the theoretical analysis. Each factor is built on the theoretical basis of multiple fields and developed by different researchers. It should also be noted that when we introduce these factors below, they are not arranged in a specific order. 2.2.1 Consistency When retailers have physical stores and online stores, that is, multi-channel retailers, they face a unique situation. Wang believes that Beatty & Mothersbaugh (2009) consumers' previous attitudes towards physical stores will affect consumers' attitudes towards websites. The current challenge faced by companies that want to start selling through new sales channels is that they need to analyze customer attitudes toward existing channels and adjust new channels accordingly. According to Wang, Beatty & Mothersbaugh (2009), companies have two different options when establishing new sales channels. If the current customer’s attitude is not good for the company, the first option applies, and the new sales channel should keep a distance from the image reflected by the current channel. On the other hand, if the customer has a good attitude towards the current sales channel, the company should try to keep the image of the new sales channel in line with the old channel. 2.2.2 Marketing and customer loyalty According to Berry & Parasuraman (1991), the ultimate goal of the marketing process is to transform indifferent consumers, make them loyal, and establish strong relationships with already loyal consumers. Kandampully & Suhartanto (2003) describes overall customer loyalty from two dimensions. The first dimension involves actual customer behavior of loyalty, such as repeated purchases by customers from the same company and spreading the company’s positive attitude over time. The second dimension is described as the attitude dimension, which deals with the intention of customers to participate in loyalty behavior. When choosing a sales channel, marketing is always an important factor, whether the company is online sales, physical stores or retailers. Due to the development of e-commerce in the past decade, four extended aspects of online loyalty behavior have been developed to solve the increasingly important problems of marketing: browsing (return intention), purchase (purchase intention), price premium (payment intention) premium) And recommendation (intentionally recommending websites) (Kwon & Lennon, 2009). 2.2.3 When high-cost companies choose sales channels, choice means a variety of different costs. Through the development of e-commerce in the past ten years, the cost difference faced by enterprises is greater than in the previous period. One cost consideration that must be considered is the development of spatial geography, that is, the geographical distribution of consumers and manufacturers. Krugman (1998) pointed out that companies will consider a variety of substantive impacts when operating in different geographic environments. The impact of the new global market size leads to different high costs depending on the sales channels selected by the company. These different high costs will also affect the economic sustainability of the company and the entire apparel retail industry. If the company operates through physical stores, Krugman (1998) points out that an important consideration is the high rents of office and retail space and the cost of personnel in certain large cities. However, online sales may reduce high rental costs and increase the company's competitive advantage, thereby affecting economic sustainability. E-commerce can also reduce consumer transaction costs, such as search and information costs. By reducing consumer transaction costs through online sales, companies will face high transportation costs because companies must deliver products to consumers (Pires & Aisbett, 2003; Krugman, 1998). 2.2.4 Sustainability When companies choose sales channels, it is important to consider and understand how these different choices affect the world around them. This factor can be summarized by focusing on sustainability, which consists of two main components; environmental sustainability and corporate social responsibility (CSR) (de Brito et al., 2008). Environmental sustainability includes the impact on climate and energy consumption, water and biodiversity. In general, to obtain a sustainable supply and distribution chain in the fashion retail industry, companies must consider emissions such as carbon dioxide and chemical products at the production stage. (de Brito, et al., 2008) Rotem-Mindali (2014) believes that e-commerce can have a positive impact on environmental sustainability by reducing waste in printed catalogs, retail space, and transportation requirements. In addition, corporate social responsibility includes ethical standards and the company's impact on its consumers, employees, communities, and other stakeholders. Read Less