PetSmart acquired Pet360 for $130 million in cash and up to $30 million more in future performance-based payments.
How the web changes the ways that retailers interact with their customers.
Here’s the dilemma for retailers when it comes to customer relationship management: A customer comes to a web site or a store, looks around, doesn’t buy anything right away, comes back a few days later, again just shopping. Finally a week or so later, the customer comes back and buys something. Generally, the retailer has no idea who that customer is, how often the customer has visited the site or the store and what the customer has bought in the past.
“CRM in retailing is very different from CRM in other industries,” says Peter Baskin, vice president and general manager of CRM for Minneapolis-based Retek Inc. “Many of the transactions are anonymous. E-CRM only kicks in when you have a named customer or when the customer does something to identify herself.”
And on the Internet, the challenges become even greater because there is no face-to-face contact between the retailer and the customer. Thus customers seek out some kind of assurances that the order has been received, processed and is on its way. And giving those assurances raises retailers’ cost of doing business. “We’re focusing on the mundane aspects of ordering in a non-face-to-face environment,” says David Himes, senior vice president for technology solutions with Greenwich, Conn.-based NewRoads Inc.
The trick is for a retailer to identify the customer as quickly as possible and make sure any information about the customer is immediately available as soon as the customer contacts the company. To make that happen, the retailer must have a broader view of what constitutes CRM to be able to capture much more data than is currently possible and to communicate data to customers. The key to making CRM work, then, is to make sure the internal CRM system can talk to customers outside of the enterprise, says Loyd Olson, chief marketing officer with Atlanta-based eshare Communications Inc. “Until now, CRM has been working primarily within the four walls of a company,” he says. “It was used to track contacts and to track customer information. We provide the capability to link directly to customers, vendors or partners in the outside world.”
Fast growing field
Customer relationship management systems are among the fastest growing electronic commerce applications. Framingham, Mass.-based research company IDC reports that spending on CRM applications will grow 20% a year from 2000 to 2005, reaching $76 billion worldwide in all industries. IDC says retailer spending will be an important part of the CRM market, ranking with telecommunications, finance and IT.
“CRM is no longer an early-adopter market in the U.S., in which large companies purchase CRM to determine if the solutions can offer competitive advantage,” Chris Fletcher, researcher with the Boston-based Aberdeen Group, says in his “What Works: 10 Significant CRM Implementations of 2000” report issued in April. “Depending on the market, the competitive advantage is assumed, and smaller organizations - midsize companies in the market mainstream - are purchasing CRM to stay current with their larger rivals.”
When considering an eCRM system, retailers must measure one way of communicating with customers against others, says Frank Badillo, Columbus, Ohio-based senior retail economist and principal consultant with PricewaterhouseCoopers. “For eCRM to work, you really have to understand your customers,” he says.
For instance, a retailer would manage the relationship differently with customers who come online to shop and compare prices then purchase in a store from how it would manage the relationship with those who come online to buy, he says. “ECRM is another channel for reaching your customers,” he says. “And you have to weigh an investment in CRM against all other investments, such as in stores, catalogs, kiosks and the new ones that come along all the time like mobile communication.”
Among the companies making a pitch for this lucrative market are Retek, NewRoads and eshare. While each takes a different approach to the market, they share a belief that companies can successfully leverage the information they already possess into processes that improve customer service and thus strengthen the customer relationship. “We have all this data and customers are calling and asking for it already,” says NewRoads’ Himes. “We can give it to them via an e-mail or a web-based capability.”
Choose from 16 messages
NewRoads has just released a product called NewRoads Customer Concierge that incorporates the information from the order management system into an e-mail communication with the customer. Customers can choose what they want to know about their order from a list of 16 order status messages, starting with such basics as notifying the customer the credit card issuer has authorized the card, through telling her that the warehouse has picked and packed the item, printed the label and shipped the package. NewRoads Customer Concierge extracts the information from the order management system and sends it in an e-mail to the customer.
NewRoads’ automated system also can keep the customer informed of the status of the shipment-even alerting customers to any delays due to weather-and give an estimated delivery date. “Probably most customers will never even ask for it,” Himes says. “But those who are not confident that the order is being handled right will ask for it, and we’ll be able to deliver the information to them.”
NewRoads, which operates 21 fulfillment centers with a total of 2 million square feet, performs outsourced fulfillment for some 200 retailers and manufacturers who are selling direct to the consumer for the first time. “We are focusing on retailers and manufacturers who have no experience doing this sort of sale,” Himes says. “The need for companies like those to fill individual orders has raised the opportunities for companies like NewRoads.”
NewRoads employs 3,500, which grows to 5,000 during the holidays, including 1,500 in call centers.