 Hello and welcome back to the NPTEL course on Supply Chain Digitization. I am Professor Sushmita Narayan from Indian Institute of Management Mumbai. We shall be continuing upon our discussions in this set of lectures on channel structures in the supply chain. We have already seen two kinds of possible structures which are very much the reference point when we look at making decisions namely the decentralized and centralized supply chain structures. Here we are going to look at some specific structures which have become really popular and very relevant considering the context of the platform economy and that is the way we are going to try and connect the concept of platform economy to supply chain structures. So, the types of structures that we shall be discussing in this series of lectures would be the break and water channel, dual channels, multi channels and omni channels. A variety of business models have actually emerged over the years with the growth of the platform economy with digitization and different types of technological advancements that have happened in information processing, material processing, relationship management as well as data processing and financial transactions. So, in a lot of ways a lot of technological advancements have led to a growth of different kinds of business models when it comes to supply chains and that is what we are going to explore in this set of sessions. Particularly in this lecture what I would be looking at is the first basic model which is called as the brick and mortar model. We will have a brief overview of what is meant by a brick and mortar structure and then discuss some of the benefits and challenges and also explore a few examples which will create a base for the next set of lectures as well where we will explore the other kinds of models which are present namely the dual channel, multi channel and omni channel structures. So, what do we mean by brick and mortar channel or brick and mortar as a concept is what we are going to discuss now. This is our traditional understanding of what the supply chain looks like manufacturer, distributor and retailer followed by the customer where these arrows are representing the material flow from this side of the supply chain to the other end of the supply chain. Now, this is what we call as a traditional supply chain and in this case we have been exposed to this multiple times over a variety of sessions in this course itself and you would also have observed that the product actually moves from one stage to the next stage and finally, reaches the customer. There can be a possibility of customer returns as well or returns happening at various nodes as well. For example, the customer might not like the product and returns it to the retailer. The retailer might find that a consignment of goods obtained from the distributor is not in proper shape or technically it is not qualified as per their agreement and may send it back to the distributor. Similarly, the distributor may have a lot of dead stock which is stock which has been purchased from the manufacturer, but for some reason is not getting sold in the market and the distributor might want to return it to the manufacturer. So, this is typically the flow of materials that is going to happen. We will look at a very specific zone in itself which is the last mile and this is what we call as the last mile for any supply chain and in this particular last mile if we were to ask the question how is the sale and delivery actually enabled in the last mile of the supply chain and this is where we start understanding the concept of brick and mortar. So, our focus of discussion is going to be at this end of the supply chain where you have a retailer and where you have a customer. So, the question is how can we enable sale and delivery in this part of the supply chain. Now, last mile is a concept as such which is very common nowadays. We have heard of last mile delivery being done by e-commerce parties, we have heard delivery boys who are carrying out last mile delivery. Hence, it is a very popular aspect of supply chain which is visible to any customer nowadays and hence we shall pick up this part of the supply chain for discussion in the context of brick and mortar. So, what do we mean by this? Now, when I consider this particular supply chain typically considering the material flow how is the sale enabled is the question. So, when we consider a brick and mortar concept we have the customer actually moving to the location of the retailer and it could be the most nearby retailer or it could be a retail point which is of interest to the customer right. So, say you are interested in going to purchase some regular grocery items you would go to the nearest or local Kirana store which is present near your house and you would go and purchase the items from there. So, this could be a decision where you are taking into consideration how far you have to travel and you would go and make that purchase. But in other cases it is not necessary where you have to travel to the nearest retail point. You might want to visit a specific store in specific location and make a purchase over there. Let us say it is a vehicle or let us say it is for banking where you require some services to be provided to you at a specific location of the bank and you would proceed to that location. Maybe as per regulations you are supposed to go to certain stores. Let say you have to go for a vaccination drive for a specific kind of a disease then you might have to visit a certain allotted vaccination center so on and so forth. So, it is not necessary it is the nearest retail point, but whatever is the retail point of your choice considering various factors you would go and visit that particular point of contact with the supply chain. So, what is very important to understand over here is that the retailer plays a very very important role in connecting this large part of the supply chain with the customer. So, the retailer is this touch point which is going to be present with the end customer. Now in such a case when the customer is going to visit the retailer or the retail store what can we expect happens over there. So, the customer visits the store and some of the things that the customer is going to do is view and experience the product in person. This is one of the primary reasons that we visit a store. If you were to visit a Kirana store in order to purchase let us say regular staple items like rice or pulses or wheat and other grains you would like to go and see what is the quality of grain which is going to be present and sold by the Kirana store. You might be interested in knowing if the product is fresh and you would also be interested in knowing other aspects let us say the color and you would also be satisfied in seeing whether the product which is being sold to you is weighed properly. So, there are many reasons why you would want to visit this store where you get to see the product in person and not only that you have several choices which may be presented to you right. So, suppose you have gone shopping for some kind of dress materials or dresses you would visit the store which is a retail point in the city somewhere near your house and you would ask the shopkeeper to show you all different styles of that particular dress or dress material and present it to you and you would want to feel and experience the same. You would touch the materials you would feel what is the texture of the cloth not only that you are also going to see whether the size is fitting you properly you would go for a trial in the dressing room and you would check whether it really suits you looks good on you so on and so forth. So, there are all these dimensions to this experience that are going to happen when you are going to visit the retail point. Now, this is a very very important aspect of the dimension which happens in brick and mortar retail and this is one of the major attractions for having to go to a store not only that in many cases it is also possible that this is like a social event for you. You would like to go shopping with your friends or your family and at the same time you would be visiting other places nearby maybe to pick up food or to pick up other items and you are going to have a great experience at the end of the day by doing this particular exercise. So, this is one of the reasons why a lot of people like to actually go to a store and make purchases. Now, one of the things which is going to happen is you are going to the store you would view experience the product touch the product you would not only do that you might also start discussing and negotiating with the store manager or the store personnel on various other dimensions. So, the dimensions that you could discuss would be what would be the quantity that you want to purchase. Let us say you are purchasing apparel what is the number of dresses that you want to purchase. Suppose you want to look at the colors how many colors you want to purchase. You would want to also decide upon the cost aspect of it. Let us say you are a customer who is a frequent buyer of these products you might discuss with the shopkeeper that I have been coming to your store so many times and I am a loyal customer and hence I think you should give me a discount of let us say 10% on the final bill and this kind of negotiation is something which is going to occur in this kind of a store and even this is also considered sometimes as a social event from a behavioral perspective this is also something that customers like to do when they visit the stores that is to get the full experience of bargaining and negotiating with the store personnel and after that you might also discuss as to what will be the terms related to delivery. For example, if not apparel or perhaps even grocery items you might be going out to purchase electronic goods or appliances maybe a refrigerator or so and you might be interested in discussing not just the cost the warranty period details and also the service after service details but you would also be interested in knowing how this product is going to actually reach your house. This is where you might discuss and negotiate with the retail store as to whether delivery can be carried out and by the store themselves and the product is sent to your house or to whichever location you want to transport this product or do you need to arrange for your own transport and hence if the store wants to really thrive in such an atmosphere it might start looking at providing these services as well in addition to just providing you the product in the last way. So, this is the variety of negotiations that could actually occur in this particular experience. So, some of the optional things that could happen is perhaps you would physically carry the product yourself and take it home for usage for consumption and one of the offshoots of this particular experience that you would have is not just the apparel not just the grocery items or not just the appliances you might show an interest in looking at other items as well which the store has to offer. So, let us say you have gone shopping for yourself for apparel and you chance upon some good apparel and clothes for some relatives of yours may be little children or the elderly and you would feel like purchasing those items given that there is some festival that is coming up or some occasion that is coming up and you would start looking at these items this gives a chance for the shopkeeper in order to come and negotiate with you or perhaps even try to sell those items to you. So, there are all these other possibilities that could occur when you go to a retail point and this is also one of the things that we observe when you go to a retail store you might not end up just visiting one retail store even if you are not satisfied with the kind of products that are present in that retail store you would also visit other retail stores not just that if you have even made purchases you might even do other activities as well. Like I mentioned earlier you would want to visit a nearby restaurant and go for a dining experience you might want to also visit other friends who are around so on and so forth. So, there are many activities social activities that you would tie to this. As a result the success of this store is going to be really dependent on how well this experience is provided to the customer and how well this customer is going to be happy not just with the product, but also with the experience that they have obtained. Now this is the entire concept of brick and motor stores and you would have seen different varieties of stores as well depending upon the nature of the product you might have a store which is just going to have one or two personnel who are operating. This is very common when we go to small Kirana stores or small outlets where a lot of products are actually available, but there is only one person who is the sales person as well as the cashier as well as the person who owns the store and maybe has a helper or two who is helping you with access to the items and in packaging and so on and so forth. But in other larger retail stores organized retail as we call it these days let us say you go to a shopping mall you will see several stores under the same roof not just that if you go to a specific store let us say you have gone to a large store where they sell a lot of different kinds of apparel as well as cosmetics and all different kinds of items related to self-care so on and so forth. You will see that a lot of store personnel are going to be there there will be a great ambience to the store. You have the flexibility of going and visiting different sections of the store picking up items and viewing them yourself this is an experience which is given to the customer and at the other hand for the same kind of products you might have a different kind of a store setting where you are going to visit the store and there will be store personnel sitting at the counter who are going to show you the different kind of apparel as you keep choosing. So, different kinds of experiences can actually be provided in the brick and mortar store. Now considering this is what a brick and mortar store looks like what we need to understand is the concept of brick and mortar is not just limited to retail brick and mortar in a sense is only implying one aspect which is the possibility or the scenario in which the customer gets the opportunity to visit the location of the supplier view the products evaluate the products as well as discuss and negotiate with the supplier on the different terms and conditions before actually making a purchase. So, this concept of brick and mortar is not just there in retail it is going to be there in any kind of business to business scenario also. So, the idea of brick and mortar as we see can apply to any section of the supply chain it is not necessary that we have to observe it only in retail and what we can see over here in such a case that it could be that the customer is visiting the retailer this could be an example of brick and mortar in the B2C channel where we call B2C as business to customer relations or business to customer engagements. It could mean that the retailer is visiting the distributor viewing the items and discussing with the distributor what needs to be done they might even send certain you know personnel of theirs to go into inspections of how the products are actually being stored and kept and have some discussions on that as well. It could also mean that the distributor or the retailer for example any of these parties is going to visit the manufacturer and have a look at what kind of products need to be sold, what kind of products need to be manufactured so on and so forth. So, the concept theoretically speaking or broadly speaking can be applied at any level and as you go further upstream of this supply chain it could be a scenario in which the manufacturer is going to visit several suppliers is going to understand what kind of raw materials they are having, what kind of products and components they can supply and make decisions as to what will be the kind of product that needs to be created, how does it need to be put together and how does it need to be sold to the manufacturer or shipped to the manufacturer all of these discussions can be done before the discussion on actual purchase is made. As we can see the concept of purchase at the end of the manufacturer is quite different from the concept of purchase at the end of the customer where the customer is the final consumer of the product while the manufacturer, distributor and retailer are intermediate parties who are going to play a role in ensuring that the customer gets the product at the end of the day. So, the concept of brick and mortar as we see is more popular in the B to C context, but theoretically speaking it applies in any of these contexts and as we progress in our lectures we are going to see how brick and mortar concept in this part of the supply chain can also be viewed in different ways with the advent of the platform economy. More specifically when we see the concept of brick and mortar that we see nowadays has undergone immense transformation mainly because of the rise of the platform economy digitization which I have already spoken about. So, let us look at what are some of the differences or benefits and challenges of having a brick and mortar system within the retail environment. So, first and foremost when we consider the benefit we can obviously see that the primary benefit that is provided by a brick and mortar system is the kind of experience that is provided to the customer which is they can physically check the product and it helps the customer make a very informed purchase decision. So, it is the customer himself or herself who views the product and makes the decision as to whether they want this product or not. So, in many ways these helps in creating a very sound system for the purchase which is you know going to support the business as well as a customer because of the fact that the customer is directly engaging with the product before the purchase is made. The second benefit as we can think the retail store that the customer is going to visit acts as a touch point. So, this is the place where the customer has made the purchase. So, if they find any issues with respect to the product some complaints some after sales concerns that are going to be there they need not contact let us say the manufacturer right. They have already purchased the item from the retail store they also have a history of the kind of discussions they had with the store personnel or the shopkeeper and if they do not like the product they might want to return it within a certain period if they are willing to do so and the retailer is going to take back the product or maybe give some kind of a refund or replacement for that product. So, this acts like a touch point for the customer and again this can add value to the experience for the customer having the satisfaction or the knowledge that there is a human interaction which is going to be present that can help you deal with any kinds of concerns and issues with respect to the product purchased. Now, this specific real time interaction is also very useful because if this information is going to be captured in real time as the interaction is happening in real time you have gone to the store you have seen the product and if you do not like the product you might actually give feedback to the store personnel that they you do not like this product because perhaps you feel that it is overpriced you might very frankly also say that the product does not fit within your budget you might also share information that you know this product is available at a different price in a related store. You might also try out the product if it is apparel or shoes for that matter and you can share information that the product is not working out well because aesthetically it is not looking good on you or there could be some ergonomic issues related to the product let us say to the pair of shoes and you are finding them uncomfortable you can give this direct information without even having made a purchase and this is very valuable market information that can be captured when there is going to be a retail store that is present where the customer can visit the store. So, this is one of the key benefits as well when we think of brick and mortar as a concept. Now, as the customer goes to the store the retailer can actually prevail upon the customer's thoughts and decision making processes and start encouraging the customers to purchase other products. Now, this can help utilize the store to a better extent like I said earlier the success of the store will be dependent upon how good the experience of the customer is going to be. So, if the customer's experience is good with one of the products or a few of the products or even if they do not purchase many of the products that they intended to they might make a better purchase if the retailer is able to convince the customer at that point. Again this is something which can happen in real time with well trained personnel with qualified personnel or with personnel who have a knack for dealing with customers like this and converting them into final customers or end customers who have purchased the product. And finally, since the experience provided through the brick and mortar store can be very good this can help generate customer loyalty over the long run right. So, if you have experienced dining experience in a good restaurant which you had visited recently you were happy with not just the food, but also the ambience you were also happy with the kind of service provided the politeness of the servers the quality of food the aesthetics of the food and the kind of ambience in terms of the music and the lighting and all of this creates a very good memory for you and you are quite happy with this the price also was good. Then you might think of coming back to the store again in the future because a very strong connect has been made with you. Now, this is definitely going to be the beauty of in-person interactions that help generate very strong customer loyalty. This is also going to be present in other environments or service environments as well like I said for example, in banking if the banking experience is going to be very good for the customer where they meet the teller or the cashier and they are going to be able to get their benefits quickly then a good service experience is created and loyalty is created for the bank as well. Let us move to what could be the challenges of this. Some of the challenges that we observe is first and foremost since it is a brick and mortar concept the customer has to actually travel has to make the travel to the store and the store could be far or could be near. So, it is an effort which is going to go into this. So, this is a challenge which can actually make the customer think twice before you know deciding to go out to purchase items. So, this can actually prevent customers from coming forth. The second thing is when the customer comes to the store they would need to spend time. They have to evaluate the products they need to perhaps wait in queue when they are seeing through the products or trying the products or when they are trying to pay for the products they might need to wait in queue they would also spend time in travel. So, it is not just an effort it is also a time component which is going to be there and if they do not have enough time to do this they might not visit the store unless absolutely necessary. On the other hand if you think of the retailers side of things the retailer needs to invest in space space which is required for storing products to showcase the products in a way which is appealing to the customers such that they can purchase it. So, they have to invest not just in the area, but also in the layout in the way the products are going to be shown to the customers in the lighting etcetera. They need to have specific counters and specific areas within the store which is meant for billing and checkout. If the store really wants to encourage customers to come in they might want to provide also parking so on and so forth. Not just this they need to invest in manpower like store personnel for business development for selling the product to the customer labor for material handling cashiers security personnel managers etcetera. And there will be definitely a challenge for the entire supply chain also to depend upon the brick and mortar store and why is that so? The retail stores will be limited in size and they may be not capable of reaching out to too many customers. So, which means at some point in time you need to scale up either you expand the retail store or you need to establish more retail stores. And sometimes if the product demand is not too good your retail store might actually be under utilized and hence it might not justify the costs that have gone into identifying purchasing space purchasing manpower and other resources and other investments which would be related to this. So, constantly you might have to make decisions as to whether you add more stores relocate stores shut down stores so on and so forth. So, this creates issues for the supply chain as well. Now, with these benefits and challenges that we observe with brick and mortar systems we will now move to the next concept which is the role of platform economy which has created a disruption in the way we look at brick and mortar systems. So, in the next session we are going to see how these disruptions have happened and how the variety of channels such as omnichannels, multi channels and dual channels have emerged which give rise to different kinds of business models with the advent of technology. Thank you and see you in the next session.