In its second-largest acquisition, Amazon buys the company for $970 million.
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But the question retailers often face is: What is that fair share? Today, the web site REI launched in 1996 brings in about 80% of the 15% of total sales that are direct sales, or about 12% of REI`s sales overall. But that`s not to say that the web channel gets 12% of REI`s technology and marketing investment and stores get the rest. Instead, REI has developed a resource investment approach that views the web as an entry point to its store channel as well as a place to ring up sales on its own, Broughton says.
REI knows it gets the most from its resource investment when the dollars it pours into one channel also help lift another. So decisions on where and when to spend are based not so much on what`s good for one channel as what`s good for REI overall. Since REI has worked on technology to facilitate store pick-up of online orders, for example, the store-pick-up option has come to account for 30% of all web sales.
"We`ve also seen an incremental sales lift from those people coming into the stores," says Broughton. "It encourages people to have more visits to the stores. They`re thrilled they don`t have to pay shipping, especially on bulky items. And once they`re there, they tend to buy something in addition to what they`ve already bought through the store pick-up program." Thus, investing in building the store pick-up option onto the web site has added to store sales.
Here`s another example of REI`s cross-channel investment approach: "We`re building new stores at a fast clip, and one of the things we`ve found is that as we have a larger and larger population of store employees, they`re tending to rely pretty heavily for product information on REI.com, which is the programming for the store kiosks," Broughton says. As a result, REI has made the decision as it opens new stores to roll up the cost of enough kiosks into the cost of opening each store. It`s also putting additional kiosks into older stores--some only have one. Is that investment in its web channel, its existing store base, or its new stores? Under REI`s strategy, the investment benefits all three.
There`s a pro forma for every new store location and similar documentation required to prove out ROI for every major expenditure in the web channel, such as for a new site search engine, for example. The team makes the decision on proposals. "Not everybody gets what they want when they want it, but it`s not about setting one group against another," Broughton says. "It`s much more about looking strategically at what technology can do for REI."