May 23, 2002, 12:00 AM

Proving the concept

Internet Retailer profiles five retailers who excel in making the web an integral part of a multi-channel strategy: Albertson’s, Best Buy, Lands’ End, QVC and REI.

Success on the web today is all about making the channels work together. With a tiny number of notable exceptions—think eBags.com or SmartBargains.com—retailers today are embracing the multi-channel strategy. The five companies profiled in these pages demonstrate an outstanding grasp of how channels work together.

What these five have in common is that they are enthusiastic proponents of integrated, multi-channel retailing. Their web sites, catalogs, stores and/or kiosks all work together toward a common goal: Serving the customer and tightening the bond using whatever channel the customer wants. Key to achieving that goal is building on the strengths of each channel so customers can shop in each one in ways that they can’t shop in others.

These stories also profile the executives who are making sure that each company’s web strategy stays on track with its overall strategy. What they have in common is that they started their jobs without a lot of web experience (who did have any?) and they share a vision of how to integrate the web into a retailing operation so all channels work together.

Internet Retailer’s editors chose the following five companies based on their knowledge of the market and discussions with analysts and consultants who follow multi-channel retailing. They are the ones who are proving that multi-channel retailing is not just the latest fad in an industry that’s always looking for the next big thing. It’s a viable strategy that will produce the next winners in the ever-competitive retailing industry.

Albertson’s Inc. Best Buy Co. Inc.
Lands’ End Inc. QVC Inc.
Recreational Equipment Inc.

Albertson’s brand and infrastructure
work together to create web success

By Kurt Peters

During the dot-com heyday, the area of online shopping that received the most attention was grocery shopping. Webvan Group Inc. had a high profile and the press followed its every move. Ditto for Peapod. But Webvan died a quick death after being unable to create a national brand and infrastructure quickly or economically enough. And Peapod lowered its profile after its acquisition by Dutch supermarket behemoth Royal Ahold.

But while the most visible names suddenly became invisible, that didn’t mean online grocery shopping was dead. In fact, a number of supermarket chains continued quiet experiments. Those small-scale efforts proved that customers still loved the convenience of online shopping.

Albertson’s Inc., one of the largest supermarket chains in the U.S., quietly proved the concept even during the height of the dot-com sound and fury. Today, Albertson’s has a successful online offering that neatly demonstrates how the online and offline operations can work together. Albertson’s uses its well-known brand name to attract customers and its infrastructure to fulfill orders from one of nine fulfillment stores.

“When developing our online strategy, we knew not to overbuild with too much technology too fast because it would be too costly to support an emerging business model,” says Bob Dunst, executive vice president and chief technology officer of Albertson’s. “Traditional grocery chains not only have retail infrastructures with brand recognition, they also have dependable wholesale vendor relationships and pricing structures with manufactures of consumer products. This translates into purchasing power and operating efficiencies, as well as competitive price advantages that pure-play companies cannot match.”

Albertson’s launched its first online offering in Seattle in November 1999. It kept a low profile and scoped out the market. Only after the firestorm of dot-com failures had cleared away some of the competition did Albertson’s expand, and then it did so in rapid order. Last October, nearly two years after the Seattle launch, Albertson’s offered online grocery shopping in San Diego. Four months later in February, it expanded to Los Angeles, Riverside and Orange counties in California, then the next month to San Francisco and Portland, Ore. “The test period for the centralized fulfillment center was quite brief,” Dunst says.

Today, its online offering covers 3,664 ZIP codes served by over 550 stores and nine fulfillment centers. It also allows customers to place orders over the web and pick them up at their neighborhood stores. It’s the only chain offering online shopping in all western states. And Albertson’s executives have said it’s a safe bet that further expansion is on the way.

Logistics challenge

While the brand and the supermarket infrastructure are crucial to Albertsons.com’s success, the technology makes it possible, Dunst says. “Offering the convenience of the computer, the variety and product quality of the supermarket, speed of home delivery and the courtesy of our delivery specialists, all at reasonable pricing, seems simple, but it’s a massive logistics challenge that would be impossible without today’s technology,” says Dunst, a 25-year veteran of the supermarket industry, many of them in key technology management positions. “Twenty-five years of experience in managing the technology function within the grocery and drug store industry have given me the vision to see how online shopping was just another opportunity for Albertson’s to provide its customers with the service they have come to expect.”

Dunst says it’s too early to tell what benefits Albertson’s has gained from online shopping. Other chains that offer an online option believe they have gained market share through a web offering. Albertson’s likes what it sees so far. “Our Internet product results are very encouraging and we continually tweak Internet shopping so that it will become a business sector with sales and profit growth characteristics that are akin to its in-store brethren,” Dunst says. “We continue to evaluate new markets to which we can expand this service.”

kurt@verticalwebmedia.com

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Best Buy delivers the experience
customers want in every channel

By Andrea McKenna

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