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1CONFIDENTIAL
Consumer Logistics:
“movement and handling of goods and people that is performed by consumers to facilitate consumption.”
Granzin (1990)
2CONFIDENTIAL
The Downstream Supply Chain
M W R C
M = manufacturer R = retailer
W = wholesaler C = consumer
3CONFIDENTIAL
Consumer (Logistics) Behavior
Need Recognition
Transportation
Shopping/Search
Exchange
Transportation & Storage
Production/Consumption
4CONFIDENTIAL
Consumer Behavior--Two Views
MARKETING LOGISTICS
Problem Recognition Need Arises
Search Transportation
Evaluation of Options Shopping, Checkout
Purchase Decision Transportation
Purchase Act Storage
Postpurchase Evaluation Consumption
5CONFIDENTIAL
Time & Money
Where does the money go?(Kelley 1958)•commodity costs•convenience costs
Where does the time go?(Downs 1961)•travel time•shopping time•checkout time
6CONFIDENTIAL
Crowell & Bowers (1977)
TC = price + transportation + time
Add cost of time to the equation and consumers visit fewer stores.
7CONFIDENTIAL
“ Prisoner of Time,” Ms., Oct. 1988
“ during her or his lifetime, the average American squanders five months waiting for traffic lights to change, eight months opening unsolicited mail, a year looking for misplaced objects, two years in futile attempts to return phone calls, four years doing basic housework, and five years waiting in line--a total of 13 years gone up in smoke.”
Pogrebin (1988)
8CONFIDENTIAL
The Alberta Phone Survey
Random-digit dialing10 call backsCATI: computer-assisted telephone interviews30-minute confidential interviewUrban vs. RuralTopic: grocery shoppingR = 67.1%
11CONFIDENTIAL
Stockout Response
Stockoutof item xat Store A
Go to Store B
Buy item y
Backorder (defer purchase)
12CONFIDENTIAL
Response to Stock-out of Item x at Store A
Item x at Store B ------- 47%
Item y at Store A ------- 15%
Defer purchase ---------- 32%
13CONFIDENTIAL
Time and Availability
Average Travel Time = 13.8 minutes
Average Shopping Time = 41.2 minutes
Average Checkout Time = 12.5 minutes
Average Stock-out = 1.4 items
14CONFIDENTIAL
Predictors of Consumer Satisfaction
Stock Availability ------------- YES
Check-out Time --------------- YES
Shopping Time ----------------- NO
Travel Time --------------------- NO
15CONFIDENTIAL
How to: Please the Consumer
reduce product prices
save consumers time (Bender 1964)
give TLC!•Tender Loving Care•Total Logistics Costs
16CONFIDENTIAL
TC = pQ + c(I - A) + a(2D) + wT
p = purchase priceQ = quantity purchasedc = compromise costI = ideal item; A = actual itema = cost of travel ($/mile)D = distance to storew = cost of time ($/hour)T = time (travel + shopping + checkout)
17CONFIDENTIAL
TC = pQ + c(I - A) + a(2D) + wT
p = purchase priceQ = quantity purchased
FOB origin vs. destination
Sales tax
Q = f{family size; vehicle capacity; location (urban vs. rural); p}
18CONFIDENTIAL
TC = pQ + c(I - A) + a(2D) + wT
c = compromise costI = ideal item; A = actual item
stock-outs?
consumer risk perceptions
reverse logistics implications
19CONFIDENTIAL
TC = pQ + c(I - A) + a(2D) + wT
a = cost of travel ($/mile)D = distance to store
consumer perceptions of travel costs
retail (car, gas) vs. e-tail (computer, AOL)
reverse logistics implications
20CONFIDENTIAL
TC = pQ + c(I - A) + a(2D) + wT
w = cost of time ($/hour)T = time (travel + shopping + checkout)
consumer perceptions of time
retail vs. e-tail
retailer impacts checkout, but not travel
21CONFIDENTIAL
“ Home online mantra is ‘logistics’”
“If the key to real-world retailing is location, location, location, then for e-commerce it’s logistics, logistics, logistics.”
Carroll (2000)
22CONFIDENTIAL
“ E-Commerce Success . . Order Fulfillment Chaos”
“Companies are figuring out how to sell goods over the Internet, but getting the goods to the customer is another story. As online orders from consumers and businesses soar past the 2 billion per year mark, Net sellers will be faced with logistics chaos.”
Anonymous (1999)
23CONFIDENTIAL
B2C e-commerce Markets
National markets
Local markets XXX
Hour delivery markets
Copacino (2000)
24CONFIDENTIAL
Aspinwall’s (1958) Types of Goods
Characteristic Red Orange Yellow
Replacement Rate HIGH MED. LOW
Gross Margin LOW MED. HIGH
Adjustment LOW MED. HIGH
Consumption Time LOW MED. HIGH
Searching Time LOW MED. HIGH
27CONFIDENTIAL
e.g. e-grocers
Peapod.com IN BUSINESS
Webvan.com BANKRUPT
Groceryworks.com BOUGHT BY SAFEWAY
28CONFIDENTIAL
Peapod.com
Top-quality products
Competitive prices
Convenience
First-rate customer service
30CONFIDENTIAL
B2C Logistics Options
Consumer pick-up (drive through)
Home delivery
Drop-off/pick-up (mini-storage)
Office delivery