December 26, 2000, 9:55 AM

Chain Reaction

(Page 3 of 3)

Flashy electronic catalogs are certainly a tool traditional retailers can use to attract shoppers to their site. But more important is implementing the right marketing strategy to keep them buying and coming back. To achieve results, some retailers such as Kmart are taking merchandising and marketing strategies that work in their physical stores and extending them to the Internet.

Such an approach can create a high profile and instant traffic and credibility for a Web site. Over the years, Kmart has reinvented its stores to focus on a strong program of private labels endorsed by celebrities such as actress Jaclyn Smith and home entertainment and life style doyenne Martha Stewart.

And now that same concept will remain a principal element of Kmart’s Web plan. “We are not trying to pioneer this market,” says Marisha K. Geraghty, divisional vice president, electronic commerce, Kmart Corp., Troy, Mich. “We are going to stick with what we know best and use resources to get into just the right categories.”

Tried-and-true methods

When Kmart’s Web store went live in September, the site targeted busy young professional mothers with specialty health products such as vitamins and workout clothes designed by well-known fitness expert and model Kathy Ireland. To draw women to its Web site, Kmart hired a New York Internet advertising agency to develop a central marketing message, In Shape for Life, and featured Ireland prominently in daily interactive chat sessions on fitness, health and family topics. “The target for this e-commerce category is moms and our Internet strategy is targeting particular customer segments with information, interaction and unique products,” Geraghty says. Kmart’s approach to electronic commerce is conservative and that attitude is typical of other national retailers.

Because the cost of building a first-rate Web store is so high, even deep-pocketed chains are worried about getting a pay off on their investments.

A national retailer can build a basic transaction-enabled storefront for under $2 million.

But if the retailer wants a high-end site entirely integrated with all back-end computer systems, electronic links to key product distributors and equipped with the hottest Internet marketing applications such as customer profiling, the cost can top $20 million.

Throw in millions more for national advertising campaigns or signing exclusive marketing deals with big portal companies such as America Online and Yahoo, and the start-up costs for electronic commerce can top $30 million. “The entry costs even for a national chain aren’t cheap if they want to do it right,” says Carol A. Ferrara, senior research analyst, The Gartner Group, Stamford, Conn.

Because the business is so competitive, electronic commerce executives at large national chains aren’t talking openly about sales and future profits yet. Most will say only that recent online holiday sales met or exceeded expectations.

But as the Internet retailing wars heat up and even more virtual merchants, catalogers and brand name manufacturers open Web stores and start selling to the public, those national chains scrambling to go online believe their timing is impeccable.

“The Web is a great way to build traffic because it completes the brand experience,” says Barbara Geiben, manager, Internet strategies, Bloomingdale’s, New York. “It’s more than just an opportunity to sell online. The Internet is a tremendous medium and marketing machine that can create business across all channels, including bricks-and-mortar.” •

How the Internet
can boost foot traffic

Macys.com President Kent Anderson has good advice for big retailers worried about losing their physical store traffic to the Web: Don’t be.

A well-planned Internet store can generate both online and in-store sales. Strong editorial content and descriptions of more than 250,000 items on the Web site helped Macy’s attract more shoppers to its bricks-and-mortar locations during the Christmas shopping season.

“Our Web store isn’t just about generating online sales, but about driving traffic across all our distribution channels,” Anderson says. “Over the holidays our sales associates began noticing people coming into our stores with printed pages from the Web site and asking if we carried those items. That traffic created additional sales for our physical stores and that’s OK too.” •

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