In its second-largest acquisition, Amazon buys the company for $970 million.
The web is allowing retailers to extend product lines—from selling a deeper assortment of CDs and DVDs to offering custom merchandise.
As sports apparel retailer Roots Canada Ltd. gears up for its next big push for licensed Olympics products later this year, it expects strong sales long before the U.S. Olympic Team begins competing in the Summer Games in Greece. But it won’t rely solely on its eight U.S. stores. For both volume and innovation in U.S. sales, it’s turning to Roots-Direct.com.
The company outfits Olympics teams from the U.S., Canada, Great Britain and Barbados with official parade wear and related casual wear made of team colors. But its biggest business is in sales to consumers of jackets, sweaters, hats, bags and other apparel and accessories related to each team it outfits. “We expect a big increase this year,” says James Connell, manager of new media and e-commerce. He adds that Roots will soon release exclusively on Roots-Direct a U.S. Olympic training collection of exercise wear as a way to build interest leading to the Summer Games.
Still, Roots serves a niche market best addressed with a broad brush. To better meet U.S. demand for its products during the last Olympics-the Winter Games in Salt Lake City in 2002-it decided to launch Roots-Direct.com early that year as a dedicated U.S. web site, which goes far beyond the retailing capabilities of its U.S. stores. In addition to reaching more consumers, Roots-Direct has expanded its product line with such items as gear bags and baseball-style sports jackets-each of which can be customized online in an interactive shopping feature. “Customers can plan these customized products in our stores, but it’s harder to do,” Connell says. “Store associates can only try to describe what examples of customer products would look like.”
Turning to the web
Now as Roots gets set for this year’s Olympics, it’s following a course that has become more common among store retailers-turning to the web to merchandise products that for one reason or another wouldn’t fit with the rest of the merchandise in their physical locations. Merchants ranging from supermarkets to consumer electronics retailers and general merchandisers are finding multiple ways to use the web as a springboard to broader selections and wider audiences. Fred Meyer, a multi-department grocery unit of Kroger Co., uses its web site to sell a far broader range of DVDs, CDs and other products than it can merchandise in its stores. Safeway sells gift cards online for several other retailers, including Blockbuster Inc., Sears Roebuck and Co., KB Toys, The Gap Inc.’s Old Navy, Starbucks Corp. and Foot Locker Inc. Sears.com sells gourmet foods through links to retail partners. And Circuit City Stores Inc. sells scores of software titles through an in-store system that uses the web to burn software CDs on demand.
“Everyone is trying to get as much share of consumers’ wallets as they can,” says Patti Freeman Evans, retail analyst with Jupiter Research. “One good way to do that is by expanding product offers on the web.”
But with the opportunities for increased sales and opportunities for continued growth with larger customer bases, retailers also take on risks. For one thing, retailers must rely on outside parties to provide goods and handle fulfillment, in some cases even customer service. For another, if a retailer chooses the wrong products-ones of poor quality or too different from its usual lines-it can confuse customers and detract from its reputation. Merchants should take extra care to focus on offering products that complement existing lines, Freeman Evans says. “If it makes strategic sense for a brand, it can result in a better approach,” she says.
Expanding product lines on the web presents an opportunity to entice at-home shoppers with items they might not normally buy, though this is an unproven area, experts say. “Is there a lot of impulse buying online? There’s not a lot of indication of that yet,” Freeman Evans says. “But because it’s so easy to switch to different products online, a shopper on a grocery web site could be looking for milk one minute, a gift for a grandmother the next minute, then digital music tracks.”
Other reasons to buy online
She adds, however, that expanding online product offerings and services can help some retailers like supermarkets to get more people comfortable shopping online. “People have been used to buying clothes, books and music from catalogs, so it’s easy for them to transition to buying these things online,” Freeman Evans says. “But no one has been used to buying food through catalogs, except as specialty gifts.” So by giving them other reasons to shop on the web, such as for some of the same extraneous products appearing in supermarkets like DVDs, or by letting shoppers order online for store pickup, retailers can motivate more consumers to shop online as well as in the store, she says.
Retailers should also figure how they can develop strategic relationships with outside partners who may be providing products or fulfillment services, or both, she adds. And there are plenty of other risks, particularly for brick-and-mortar retailers unaccustomed to the ways of the web. Retailers unprepared for the system of instant customer feedback and ratings services on the web can quickly build an unwanted reputation-even if it’s due to the shortcomings of a third-party service provider. “Many retailers arrive online unprepared to receive a rating from BizRate and other ratings services,” says Mark Layton, CEO of PFSWeb Inc., a fulfillment company used by Roots and other multi-channel retailers. “They don’t realize they can get killed in customer feedback systems.”
In brick-and-mortar stores, he adds, customers may be more accustomed to relatively slow processes when checking on the availability of products. “If you’re in a store and don’t see the size you need, it may take a few minutes to find a store clerk who will check in the back room,” Layton says. “That whole process can take six or seven minutes, but that’s not a viable experience on the web, where a customer wants an answer immediately. If we don’t get an answer in 10 seconds, we think it’s a slow site.”