September 3, 2002, 12:00 AM

Finessing the holidays

The biggest issue that online retailers face this holiday shopping season may be just making sure they get it right so they can hook customers who will come back.

If Holiday 2000 was the year of fixing online fulfillment issues, and Holiday 2001 the year of the online channel’s success in an otherwise sluggish retail season, what’s shaping up as the big trend story of Holiday 2002? Analysts and consultants peering ahead say there may not be one season-defining theme this year. The boom times and tactics of earlier holidays have been replaced by more experienced e-retailers now looking to fine-tuning for gains.

“We are in a period of refinement,” says Lauren Freedman, president of consultants The E-Tailing Group. “Customers who are shopping online are happy and they’re going to continue shopping this way. From the merchant’s perspective, there’s more emphasis on multi-channel. There’s been a lot of work on integration at the back end.”

Jim Okamura of consultants J.C. Williams says retailers are giving a lot of attention to detail this holiday in the hopes of finding an incremental boost. “It may sound like a bland headline, but it’s quite the reality,” Okamura says. “The drive toward profitability seems to be much more prominent. On the tactical side, we are hearing a lot of questions about effective e-mail campaigns and affiliate programs. There are few retailers who are satisfied with their results, and they feel there is much more upside there.”

Industry watchers say one story that could be brewing for the season is still too early to call. Given the retaliatory free shipping promotions launched by headline players such as Amazon.com and Buy.com this summer, consumers may hold out for more of the same when shopping for the holidays. “It’s possible to offer free shipping and be economically responsible, but if it cycles down into a oneupsmanship game by the holidays it could do a lot more damage to profitability,” says Mary Brett Whitfield of consultants Retail Forward Inc.

Okamura likens competition over free shipping to retail store pricing strategy that has in effect trained consumers to buy at sales. “They conditioned consumers to wait for sales, and they did it to themselves,” he says.

While some multi-channel retailers have made no concessions on free shipping, many of those are catalog-based companies that have customers accustomed to paying for shipping. They’ll probably be able to continue that policy with little fallout, but the pressure to drop shipping charges in a fight for market share could harm others, Whitfield says.

Free shipping and its potential effect on the season’s profits are one aspect of a theme that’s taking shape not for the holidays but for the entire year beyond: how to determine the web channel’s ROI.

And since the holiday shopping season is so crucial to all retailers, ROI issues are exaggerated during the fourth quarter and thus get the acute attention of retail managers and executives. “The goal should be that every interaction with a customer leads to a sale, whether or not it’s in that channel or on that day,” Whitfield says. “Retailers’ thinking about ROI will be much clearer after the holidays. We’re going to see a new rationalization of what it means to be a multi-channel retailer. "

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