In its second-largest acquisition, Amazon buys the company for $970 million.
Until recently, Internet retailers with brick-and-mortar locations maintained distinctions between the two channels. The rationale was that each is a distinct distribution channel with little customer overlap.
But as consumers grow more comfortable moving between online and real world shopping, many are starting to view a retailer’s web site and physical stores as interchangeable. This breed of consumer thinks nothing of browsing a web site to gather product information before going to the mall or of popping into a store to inspect an item they intend to later purchase online.
Recognizing that the blurring between web sites and stores can enhance customer satisfaction and generate incremental sales, Westwood, Mass.-based Lids.com, which exclusively sells team and branded hats, is installing kiosks linked to its web sites in more than 500 retail outlets.
Customers can use the kiosks, which are referred to as e-Centers, to access Lids’ entire inventory of 50,000 hats, which cannot be housed in any Lids store. Shoppers can order any hat through an e-Center and have it shipped free-of charge to the store from where the order was placed. Customers can also order any hat through Lids.com and have it shipped free of charge to the store of their choice within 10 days.
Lids views the e-Centers as a way to integrate the sales loop between its web site and retail outlets without cannibalizing sales through either channel. “Our stores primarily carry product geared to their local market because they are only 500 to 600 square feet, which limits them to carrying about 5,000 items,” explains Steve Murphy, vice president of e-commerce for Lids Corp. “The e-Centers are a way for customers to order items not carried by the store or that are out of stock, and at the same time promote our web site.”
Snagging the impulse buy
Lids markets the e-Centers, which are driven by in-store servers connected to high-speed satellites, as an extension of Lids.com primarily to Generation Y, technically savvy 12- to 24-year-olds, who have proven to be the most ardent users of Lids’ web site. Lids began testing the e-Center concept shortly after launching its web site in October 1999.
The e-Centers were conceived as a way to snare impulse sales from Gen Yers visiting the mall and to service other customers who are comfortable shopping on the Internet but prefer a live shopping experience or customers who may not know Lids.com exists. Murphy says Lids doesn’t have enough experience to tell if the e-Centers are generating additional sales, but, “Our aim is to get incremental sales.”
Offering free delivery to stores on orders through Lids.com completes the integration by using the site as a way to drive additional store traffic that can lead to incremental sales opportunities.
“There are a lot of synergies between the e-Centers, our web sites and the stores,” explains Murphy. “People are not going to use the e-Centers to order merchandise they know is in the store, so they serve as a virtual sales agent that provides another level of convenience and can increase in-store sales.”
Consumers visiting Lids locations without e-Centers can access Lids’ full inventory through an in-store sales representative who phones the e-customer care center and places the order.
Murphy adds that neither the e-Centers nor the company’s ship-to-store policy for merchandise ordered online have eroded web sites sales. “Otherwise, they would make no sense,” he says.
Sales through the e-Centers, which began rolling out in June, and in-store phone orders account for about 20% of Lids’ e-commerce orders, according to Murphy, who declines to reveal dollar volume. Sales via the web and the e-Centers are projected to eventually generate $10 million in revenues. Lids had installed about 125 e-Centers as of November and expects to bring at least another 100 terminals online by year’s end.
Others want in
Stores are linked to the e-Center via a direct satellite dish atop the mall in which each store is located. The satellites, which are supplied by Montreal-based Pixel Systems, are wired directly to a server within the store that operates the e-Center. The satellite provides connection speeds faster than a DSL line and just slower than a T-1 line. Lids developed the kiosks housing the e-Centers and the applications that run on them.
Lightning fast connections are considered critical to customer satisfaction, since few consumers have the patience to wait on applications that move at a snail’s pace when they have the option of being serviced by a live sales agent, notes Murphy.
Initial e-Center tests were conducted using POS terminals equipped with a web browser that connected to Lids.com. Sales agents navigated the site for consumers and placed their orders on-line. The system, which was considerably slower, was abandoned in favor of the faster stand-alone kiosks, which deliver customers the added benefit of an independent shopping experience.
The success Lids has enjoyed since deploying the e-Centers has prompted inquiries from some mall operators around the country about possible joint ventures to wire other retailers in their buildings. While Murphy says Lids is contemplating such opportunities, the company has elected for the time being to focus its efforts on connecting its stores.
“Wiring our stores is labor intensive; we want to complete that before we look at sharing our technology,” he says. “Other retailers, such as the Gap, are experimenting with satellite hook-ups, so whether we go with a partnership depends on what makes the most sense for our business.”
The company is starting to explore joint marketing opportunities through its e-Centers with other retailers. Lids is partnering with music retailer Sam Goody to distribute discount coupons good at one another’s stores. Lids coupons distributed through the 700 Sam Goody locations can be redeemed at the counter or through the e-Centers by typing in the coupon’s identification code. “We see a lot of cross-promotional opportunities like this,” says Murphy without being more specific.