MKT20023 Assignment 1, Officeworks PDF

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MKT20023

Assignment 1: Analysis of the marketing channels of a consumer electronics retailer in Australia

Introduction The purpose of this report is to critically analyse the marketing channel design of Officeworks’ electronics department in order to provide recommendations to a new market entrant, Electro Co. This report will provide a background on Officeworks’ omni-channel design, with a visual representation of its channel flows, the external environment will be analysed for potential opportunities and threats, and the strengths and weaknesses of the channel design will be discussed, supported by a SWOT analysis. Finally, recommendations will be provided to Electro Co. to compete alongside Officeworks in the Small Electrical Appliance Industry.

Background Officeworks is a one-stop retailer that specialises in office supplies, stationary, office furniture, art supplies, office snack products, and electronics for consumers such as students, professionals and businesses. Officeworks offers a range of business solutions and consumer services that require an omnichannel approach, motivated channel members and smooth flow between channel and ancillary members. These services include; online ordering, same day delivery, free next day delivery, price beat guarantees, business specialists, 30-day business accounts, free two-hour click and collect and retail store experiences. Striving to use an omni-channel approach to secure loyal customers and set themselves apart from the competition, Officeworks describes its channel design as a “sophisticated omni-channel approach which delivers exceptional value and convenience to consumers” (Westfarmers, 2018, pp. 10). Figure 1: Officeworks’ Omni-channel Design

(Westfarmers, 2018) As depicted in Figure 1, Officeworks’ channel members include manufacturers for each of its product categories, wholesalers, retail stores, business specialist services and the consumer; whilst its facilitating agencies include transportation companies, delivery services, and advertising. With over 160 stores in Australia and a broad product offering, Officeworks achieves Contactual Efficiency, meaning that target market coverage is heightened as more consumers are reached via a large quantity of purposeful store locations and convenient online shopping. The extent of Officeworks’ channel design for its online store alone has shown great success with over two million orders delivered in 2017 alone (Officeworks, 2017). This is achieved through a well-planned ancillary structure - that is, those organisations that assist in facilitating the actions of channel members without taking ownership of products (Rosenbloom, p. 27). In 2018, Officeworks opened their Mentone store, which is four times the size of the other stores. This means the store can, and does, also double as a fulfillment centre, allowing Officeworks to reduce costs and have greater efficiency with their same day delivery (Sholl, 2019). Alongside the opening, Officeworks introduced the tagline “Make Bigger things Happen” across TV, radio, catalogue, press, magazine, direct marketing, digital advertising and in-store activity (Mitchell, 2018). Moving forward, Officeworks aspires to grow their physical and digital channels, improve online experience, invest further in a seamless channel design, and grow their B2B sales. Though undisclosed in market reports, it is likely this will be achieved through motivating

channel members, including manufacturers and wholesalers though ordering large quantities of stock, and their facilitating members through ongoing service employment.

The external environment The external environment threatening and posing opportunities to Officeworks’ channel design are made up of economic, competitive, sociocultural, technological and legal factors. They are as follows;

Economic Recent tightened lending by the Australian Banks is showing overall less spending by both businesses and individual customers (Trading Economics, 2019) particularly for non-necessities such as electronics. 88% of Australians own a phone (Deloitte, 2017) and may not feel the need to upgrade merely for the sake of owning a new model. This means less stock from manufacturers and wholesalers, less work for facilitating services such as transportation, and potentially a greater investment into advertising to help target the market and create need.

Competitive Threats by the way of competition, include the convenience of retailers such as Harvey Norman and JB Hi-Fi who are positioned in shopping centres where impulsive purchases are more likely as consumers are already at the point of sale (Nicasio, 2018). Greater online options from online-only retailers of electronics may also reduce profits due to sharper pricing and less overheads (Do, 2018) thanks to less intermediaries and ancillary members.

Sociocultural With Australia’s increasing population from immigration (Letts, 2018), the demand for stock is likely to increase which may put pressure on the existing omni-channel design; however it also poses an opportunity to target new consumers and better understand them through the integration of Google Analytics and social media analytics. Such information could see Officeworks innovate its more traditional channels such as the Manufacturer, Wholesaler, and Retail stores in favour for additional groundbreaking channels such as that being explored with Google Home.

Technological The opportunities presented by Officeworks’ channel design includes the capabilities presented by its partnership with Google Home, as well as new developing technologies which may assist is more seamless operations. With increasing use of Artificial Intelligence and analytics, connectivity to the device could see autofilled carts based on previous purchases and needs observed by Google Home. Additionally, to facilitate and eradicate the

issues of items being out of stock, the introduction of an online purchases booth in-store could see customers using the revamped two-hour online delivery services. If this were to be explored, the channel may need to combat inter-type conflict between the online-store and retail-store. However, technological advances may also pose a threat to the channel design, particularly for Officeworks and Wholesalers. With technology being developed at a faster pace, it may create an influx of new models in the electronics department. This may cause a surplus of less popular stock that would then need to be moved at a discount. This may then affect the wholesaler and manufacturer for future transactions.

Legal Changes to taxes, tariffs and trade agreements could affect all members of the channel design. For example, if tariffs were to be introduced on international stocks being imported to be sold at Officeworks, the price of the product could increase exponentially depending on the value of the tariff. This would also be the case with changes to taxation laws, GST or trade agreements which could see introduction of new stock or the cessation of current stock. Furthermore, due to the potentially hazardous nature of electronics, recalls or accidents with products could see the manufacturer or retailer sued. Not only could this damage reputation, but it could also be costly and existing stock may need to be disposed.

Strengths and Weaknesses Figure 2: SWOT Strengths -

Size and capabilities of channels mean stock can be ordered in bulk Consistency from omni channel strategy Efficiency from omni channel strategy Improved purchase intention More meaningful customer experiences Transparency Mentone store Google Home integration capabilities

Opportunities

Weaknesses -

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Electronics department “Price Beat Guarantee” may not be profitable Balance of power skewed towards wholesalers and manufacturers Liabilities and insurance using ancillary members such as transportation Customer service experiences rated 1.9/5 on Product Review (Product Review, 2019)

Threats

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Capabilities to introduce autofilled carts based on previous purchases, Google Home and needs Sharper pricing on electronics, to match those of wholesalers and manufacturers where possible. Offering an online sales booth in-store for items that are out of stock More thorough order tracking for online orders

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International retailers Increased marketplace competition with more “megastores” broadening product offering Electronics retailers located in shopping centres where impulsive purchases and purchase intentions are higher Online-only retailers of electronics

As shown in Figure 2, Officeworks shows strength in its omni-channel design which enables greater efficiency, consistency, and transparency across its channel members. The efficiency of the omni-channel design means that ancillary and channel members can work seamlessly together to bring a product to the consumer. According to Arsenault (2017), such a design reduces costs and increases profit margins, permitting Officeworks to apply reductions to their electronics. In fact, in 2018 Officeworks opened their Mentone store which was built four times as large as any other store to double as a fulfillment centre and facilitate same-day delivery to the Mornington Peninsula and South Eastern Suburbs (Sholl, 2018). By employing an omni-channel design, Officeworks also engages in numerous touch points with the consumer and offers an element of transparency. For example, Officeworks offers free Wifi to its customers in store so that they check the Price Beat Guarantee (Officeworks, 2019). Additionally, Officeworks boasts Google Home integration and a social media presence which together produce meaningful data regarding consumer trends (Arsenault, 2017). Despite the many strengths of its design, Officeworks’ weaknesses are highlighted due to the nature of electronics being a high-cost item. A study by Monash University (2012), showed that 44% of shoppers purchasing electronics researched the product online prior to purchasing in-store. This is particularly concerning due to the rising number of online-only stores posing as a threat. Additionally, that manufacturers make it difficult to compete on pricing as they themselves sell direct to the consumer and hold power when on-selling to wholesalers and retailers. Furthermore, the cost, demand and value of electronics means that liabilities and insurance may be higher for transporting such goods and may make ordering large quantities of stock unfeasible for security purposes.

Recommendations When designing a marketing channel to compete with that of Officeworks, it is recommended that Electro Co. focuses on sharp pricing, introduction of own brand, and technology to bring online in-store and the store in-home through an innovative omni-channel design.

Pricing According to Do (2018), online retailers are making it more difficult for retail stores to compete on price. To counteract this, retailers are having to absorb shipping and transportation costs. In order to compete with both Officeworks’ Price Beat Guarantee, and online retailers, it is recommended that Electro Co. absorb the transportation costs to the consumer from online purchases in addition to forming long-term contractual agreements with wholesalers for a lower unit price. Additionally, it is recommended that Electro Co. store its stock with the wholesaler to ensure store rental does not unnecessarily elevate the retail price of stock simply for storage purposes.

Own Brand Since consumers in Australia are spending less of their disposable income due to tightened lending by the banks, it is recommended that Electro Co. introduce its own brand of electronics at an entry price with a high-quality promise. To cut costs of manufacturing, wholesalers and transport, it is recommended that Electro Co. manufacture their product line in Australia. According to a case study by Inform Consulting Group (2019), manufacturing in Australia with imported machinery can be considerably cheaper if executed correctly. Not only will this reduce product wastage, returns from quality concerns, time communicating with international manufacturers and title ownership of stock, but it will also provide Electro Co. with a much needed point of difference that disables Officeworks’ Price Beat Guarantee since the products would be exclusive to Electro Co. Additionally, wait time on out-of-stock orders would be fulfilled faster, and the stock would be largely unaffected by changes in tariff laws and trade agreements.

Digital innovation To further reduce returns, predict stock requirements and deliver stock express to the consumer, it is recommended that Electro Co. take advantage of new technological advancements such as augmented reality and virtual reality, both of which have been shown to increase purchase intention for online shoppers (Alexander, Salavati & Watson, 2018). The recommendation is to bring the Electro Co. store to the consumer’s home through both technologies. Virtual reality would enable the consumer to explore the product three dimensionally prior to purchase, whereas augmented reality would enable to the consumer to test the product in their home for size, style and function prior to making a purchase, making online shopping a more memorable and interactive experience.

Additionally, it is recommended that Electro Co. enables online shopping in store should a product be out of stock. This would be actioned with same-day delivery or next-day delivery to the consumer’s home. This would aim at reducing displeasure when a consumer visits a store and does not find what they need. This could pose a risk in reducing profitability of one store in favour of another or skewing predicted stock numbers.

Conclusion To conclude, Officeworks’ omni-channel design has shown to be strong, efficient and effective in reaching its consumers smoothly. Officeworks’ have started to integrate innovative technologies, such as Google Home compatibility, to their marketing channel design; however, at present Officeworks relies predominantly on traditional channel members such as manufacturers, wholesalers, retail centres and the consumer. Despite its strengths, Officeworks struggles to compete with online-only stores that may employ methods such as drop-shipping and other price-cutting strategies to offer products to the consumer at a low price. To compete against Officeworks and gain an edge in the marketplace, it is recommended that Electro Co. leverage technologies such as augmented reality and virtual reality to create a more interactive online shopping experience. It is also recommended that Electro Co. introduce their own brand of small electronics to be manufactured in Australia to compete against Officeworks’ Price Beat Guarantee. Finally, it is recommended that Electro Co. absorb some shipping costs to sell a larger quantity of products for a lower price online.

References Alexander, B, Salavati, L & Watson, A 2018, ‘The impact of experiential augmented reality applications on fashion purchase intention’, International Journal of Retail & Distribution Management, 1  7 May 2018. Arsenault, B 2017, ‘The benefits of omni-channel retail’, Fifth Quadrant, 2  3 January 2017, viewed 8 April 2019,

Deloitte 2017, Mobile Consumer Survey 2017 , Deloitte, viewed 10 April 2019,

Do, K 2018, Competing for clicks: Consumer electronics pricing pressure to hold back profit, IBISWorld, viewed 4 April 2019,

Inform Consulting Group 2019, China or Australia? Electronics company needs to switch on the best solution , Inform Consulting Group, viewed 10 April 2019,

Letts, S 2018, Australia’s population still growing strongly despite a slowdown in migration, ABC News, viewed 4 April 2019,

Mitchell, V 2018, Officerworks’ new tagline precedes strong first-half financials,  CMO From IDG, viewed 8 April 2019,

Monash University 2012, ‘Challenges and opportunities of omni-channel retailing’, Monash University, 7  November 2012, viewed 4 April 2019, < https://www.monash.edu/news/articles/challenges-and-opportunities-of-omni-channel-retailin g> Nicasio, F 2018, ‘How to encourage impulse buys and unplanned purchases in your retail store’, Vend, 6  March 2018, viewed 10 April 2019,

Officeworks 2017, ‘Officeworks’ every channel strategy drives strong full year result’, Media release, 17 August 2017, viewed 5 April 2019,

 fficeworks, viewed 5 April 2019, Officeworks 2019, Delivery, O

 engage, Mason. Rosenbloom, B 2013, Marketing Channels: A Management View, C  ower Retail, Scholl, N 2019, Is bigger, better? Officeworks talks omnichannel strategy, P viewed 8 April 2019,

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