Benefits of Virtual Retailing

"The future belongs to people who see possibilities

before they become obvious."
Ted Levitt

Anirban Biswas

Susanne L. Gauthier

Nirmal Shah
Anand Manoharan
Anirban Ghosh
Pradeep Kumar
Rajat Kumar Naik
2440 Camino Ramon
Suite 263
San Ramon, CA 94583
www.tescra.com
White Paper - Benefits of Virtual Retailing

2011 Tescra Inc.

1

INTRODUCTION
The American retail industry has always been a shoppers
Disneyland, a hub for manufacturers to unload production lots,
a dream job for the average American and a very lucrative
industry for certain investors to double their money invested for
a small period of time.
This industry, which began as a brick and mortar set-up has
expanded into online retailing. Transformation has also
occurred over the years by replacing various manually
conducted and dependable operations with effective software
for easier and effective functioning.

Whats inside
Page 2
Introduction

Page 3
Challenge Statement
Previous Options

Page 4
Value Proposition & Benefits

Page 5
Implementation

Page 6
Summary

Being a very big consumer of major software solutions, the

retail industry is looking forward to smart solutions that can
overcome challenging issues to create a better performing and
higher profit generating sector.
The retail industry as a whole has been expanding into other
channels of retailing, keeping in mind their expansion plans of
going into a multi-channel retailing strategy. Most retailers
have successfully adopted an online strategy for reaching more
customers, the effect of in store retailing and all the strategies
however could not be integrated into the online retailing
strategy.
There are various strategies that retailers have developed over
the years to optimize their merchandising strategy, the shelf
space, the floor area, complementary product pairing, free
product offers, and bundling products, which were not
effectively achieved.
Even further, the strategy of floor design used by retailers by
placing products on the floor in such a way to induce
customers towards impulse buying, as well as, exposing these
customers walking in the door to the maximum number of
items on the floor, have not quite been included in the online
retailing strategy.
Such strategies and even more concepts like up-selling and
cross selling, which was possibly achieved through the
presence of store attendants for walk-in customers, was not a
part of retailing through the online channel.
Virtual retailing as discussed in this white paper offers solutions
to most of the above stated challenges, so that retailing
solutions can be strategically implemented online.

White Paper - Benefits of Virtual Retailing

CHALLENGE STATEMENT
In order to reach more customers through a different channel, the retail industry has focused on online retailing to
penetrate an untapped market. This has proven to be profitable because the high costs of setting up new stores to enter
new markets do not exist. The only setup up required was efficient delivery system that would deliver the goods ordered to
the delivery point at the most competitive prices.
Though this was effectively implemented and most retail companies have developed an online presence, online retailing for
retailers was and still is a secondary platform for retailing, with in store retailing being the most important one.
First, the challenges that are raised reaching new customers and having a better presence is still done through new store
setup, which means a heavy setup cost. This cost keeps on increasing due to staffing of employees, training, and other fixed
costs. For example, about 76% of the revenue goes into cost of sales and fixed costs for Walmart.

2010
Net Sales
Cost of Sales

$
$

405,046
304,657

FISCAL YEARS
2009
$
$

401,087
304,056

2008
$
$

373,821
284,137

The chart above refers to Walmart's comparative cost and revenue structure for the years 2010, 2009 and 2008
respectively. This has been taken from Walmart's 2010 annual report.
Secondly, the online portals that are created for a better reach to customers have created more limitations than scopes. The
current interface of online websites and retailing portals do not allow customers to have a very good interaction with all the
products.
The first thing that is lost is a complete scan of the store and all products, which the customer experiences walking into a
physical store. This leads to the lack of any cross selling. Customers do not get to experience products being displayed
attractively, like in a physical store and that does not motivate them to buy things that were not foremost in their mind when
they visited the store. This impulse in purchase decision does not happen at all.

PREVIOUS OPTIONS
The only option previously implemented by the industry was
to turn to online retailing, where web portals displayed a
category of item types and under each type would be the
list of items.

Retailers eventually developed online visual presentations

by adding the most attractive products and items on the
home page of the online store so that the customer is
exposed to the best products with each visit to the website.

For example, the categories might be electronic items,

groceries, or toiletries, and under electronic items there
may be television, radio, and/or microwave. Once a
customer clicks a link to enter any item type and their
respective items, he or she has just been diverted away
from the main web page which displays all the item
categories.
Consequently, online retailing is not providing the customer
the physical feel of a retail store, where the customer would
be exposed to various products at the same time; the
experience one receives when they walk into a retail store.
White Paper - Benefits of Virtual Retailing

VALUE PROPOSIITON
As a Virtual Retail Specialist, we can make certain that online retailing is taken a step further, where customers get the
feel of entering a physical retail store; they have a more interactive platform to interact with products in the online
store, seeing the products closely, reading labels, and comparing alternative brands and products.
We can ensure that the online platform provides an opportunity for a cross sell or an up sell by making the customer
experience more products in the store in a single visit, and create situations for impulse purchase options buy placing
products at locations where the customers are expected to visit the most.
We can also design product pairings where complimentary products are placed side by side or near each other within
the online retail environment, giving customers the feel of a physical retail store online.

BENEFITS
:
According to the 2010 Global Powers of
Retailing Report, published each year by
Deloitte Touche Tohmatsu and Stores
Magazine, nearly one-third of the 250
largest retail organizations in the world
are based in the United States.
The average store size for the top five
retailers in the USA range from
approximately 70,000 square feet to
110,000 square feet per store. These
retail giants are generally departmental
stores, super markets and hypermarkets.
Not only the floor area but the amount
of products stacked on the shelves and
the heavy inventory maintained for every
store adds up to considerable overhead
costs for the company. The major costs
come from store maintenance and
lighting.
Additionally, there are heavy costs as
salary to employees. The USA retail
industry is a very large employer in the
USA
market,
and
contributes
approximately 11% employment, as per
a survey conducted in 2009, by the U.S.
Bureau of Labor Statistics, Division of
Current Employment, for the year 2009.

American retail giants face the burden of

setup costs to enter new markets and
untapped regions. These costs consist of;
training new employees, customer
service, store design, store setup,
inventory costs, carrying costs and real
estate costs.
Retail giant, Kmart has been severely
affected by these ever increasing set up
costs. Like many others, Kmart had to
make difficult decisions to close many of
their stores in locations which were not
reaching breakeven revenues.
Other stores in the planning stages are
experiencing issues with funds and legal
issues such as, area acquisition, power
lines setup and restriction in commercial
setup in residential areas for opening a
huge store.
Again through Virtual Retailing such setup costs can be avoided, and still giving
the customer the same feel as being
inside a brick and mortar store.

Through Virtual Retailing online, the

heavy overhead costs of a store can be
avoided, reducing a considerable
amount of costs.

White Paper - Benefits of Virtual Retailing

Virtual Retailing is going to be the future

of retailing in times to come. This
provides a good platform where
customers are exposed to store items just
like in a physical store.
Customers see the items, visit them, and
interact with them just like in a physical
retail store. Virtual retailing exposes
customers to many products at the same
time, just like in a physical retail store,
and customers can shop the different
shelves and interact with the items, such
as pick up products, see their tags,
manufacturer, date of manufacturing,
assortment on the shelf itself, shape and
much more.
The customer has been placed in a 3D
retail store where he or she acts like as if
he or she is in a real physical retail store,
and therefore by interacting with more
items at the same time as compared to
web page retailing, he or she has a
chance to compare products and make
a better choice of what to buy.
The customer feels more comfortable
buying, and ends up buying more, as he
or she is exposed to more products
through product pairing. Products like
chocolates and beer which can be
placed at high exposure locations within
a virtual retail store attract the attention
of the customer and will result in impulse
buying, which is otherwise lost in
webpage based retailing.
4

IMPLEMENTATION
It begins with building a virtual retail store
online where customers all over the world can log in and
move around the store just like a physical store and visit
specific areas in the store and shelves and choose items
from those shelves and place an order for it. This would
give customers the same feeling as visiting a physical
store. Virtual retailing also gives retailers the opportunity
to customize their virtual stores at a very negligible cost
as compared to physical store customization through
floor planning and shelf management.
This virtual retailing gives customers a more realistic feel
of retailing in comparison to webpage retailing that is
currently prevalent for many present retail companies.
Virtual retailing has the opportunity to create up-selling
and cross-selling through better product customer
interaction and product visibility. Customers will indulge
in impulse purchasing just like in a physical retail store.
This maximizes the returns from every individual
customer.
Implemented after phase 1 proves to be
profitable for any retailer. This phase is focused on
creating customer loyalty resulting in customer
repurchase and increase in revenue.

Implementable only after phases1 & 2 have

been implemented. This phase is used to integrate the
different order points, that is, the virtual retail store online
and the various kiosk points, with the delivery points that
are either the main retail store in the town or inventory
storage points from where dispatch can be made
according to the orders.
This gives the retailer easy access to customers within
their demography and even beyond without having to
expand through store setup. In this case the retailer can
have one physical store in a location they want to have a
presence in and can then expand through inventory
storage points for delivery to customers.
The result is sales without setup costs. This phase includes
further development of the virtual retail interface. It can
be further modified to make it more interactive by having
customer accounts and giving such customer account a
physical identity inside the virtual store which customers
can modify according to their preferences.
When a customer is logged onto the virtual store he or
she will see the virtual image of other customers in the
store. Interaction is possible inside the virtual store with
each other on a personal level, as well as, with the
products.

This phase takes retailing outdoor from online, but not

in-store. Kiosks are used to provide a platform for
customers to have an easy reach to retailing.

The virtual store is not limited to only shopping giving a

much more realistic feel, it can also be used for social
networking. This will increase customer presence in the
virtual store, creating a real shopping mall experience.

Such kiosks can be placed at locations where target

customer frequency is high. Such strategic locations can
prove to be a common ordering point for customers,
therefore providing a better customer reach for retailers
without having further setup costs of opening new stores.

This environment increases traffic to the virtual store

because customers are drawn to the store for different
reasons and are subsequently being exposed to store
items. This leads to the opportunity to up-sell, cross-sell
and even impulse buying by the customer.

In order to use these kiosks, customers would be issued

unique customer purchasing cards which may contain
personal details about the customer, such as, address,
credit limit, age, sex, and occupation.
This not only helps to track the customer by retailer it
also gains customer loyalty as the customer will be using
this unique customer purchasing card to buy goods from
a specific retailer.

White Paper - Benefits of Virtual Retailing

SUMMARY
It is important to adapt to our changing times, the economy and the climatic conditions.
Behavioral studies conducted by private and government agencies regarding the change in
consumer spending show that consumers all over the globe and especially in the USA are
shifting towards online purchases.
Consumers are spending a significant amount of time online, whether from the office or
home and even from their phones. Targeting a customer beyond the walls of a physical
store is slowly becoming a necessity and a trend. There are various reasons why consumers
feel online shopping is better, for several reasons; it is more cost effective, there is a
greater variety of choices, a better comparability among products, and young people find
it more convenient to shop online.
Creating an environment for off-store retailing definitely gives retailers an opportunity to
reduce costs in areas where they have been incurring heavy costs such as; assets, setup
costs, inventory storage, maintenance, floor lighting, making retailing more profitable for
the future.
This white paper does not promise to increase the revenues beyond expected levels
magically, but rather this paper recommends a solution to reduce costs, increase revenue
and mitigate risks.

Founded in 2002, TESCRA is headquartered in San Ramon, California, USA. Tescra has been identified as a Top 100 Minority owned
business, recognized as one of America's Top 500 diversity-owned businesses and recently added to the Inc 5000 list as one of the fastest
growing companies in the USA. Our experience and commitment to excellence is reflected in our customers' successes in attaining their
business objectives.
One of our core values at TESCRA is that "Performance Drives Our Success". TESCRA's objective is to craft the best possible blend of
Business and Technology Solutions for our customers' business events, achieve performance excellence and maintain lowest cost in the
supply chain.
Our ability to retain Customers and gain repeat business is a testament to our dedication to quality, business understanding, technical
abilities, project management skills, and cost-effectiveness. Customer satisfaction and long-term relationships are the best measures of
our quality and performance. We have a history of 100% successful completion of projects.

White Paper - Benefits of Virtual Retailing