June 9, 2005, 12:00 AM

How Circuit City leverages multiple channels to drive sales

Integrating the shopping experience in multiple channels – especially in-store pick-up of online orders – leads to more valuable customers at Circuit City, Fiona Dias, president of Circuit City Direct, said at the Internet Retailer Conference.

It takes a lot of planning and personnel training, but integrating the shopping experience in multiple channels – especially in-store pick-up of online orders – leads to more valuable customers at Circuit City Stores Inc., Fiona Dias, senior vice president of marketing of Circuit City Stores and president of Circuit City Direct, said in a keynote address at Internet Retailer 2005 Conference & Exhibition in Chicago this week.

“Multi-channel customers are by far our best customers, five to six times more valuable than single-channel customers, largely due to in-store pick-up,” Dias said to an audience of 1,000 people in the retail industry.

When Circuit City launched its e-commerce site in 1999 at CircuitCity.com, it decided right away to find ways for its Internet and store channels to leverage each other’s strengths and shore up each other’s weaknesses, Dias said. It identified key weaknesses of each channel-delayed gratification for customers on the web due to the time to ship products and the limitation on inventory in stores.

Then it decided to use its 600 stores to provide immediate fulfillment of web orders through in-store pickup, turning delayed gratification into near-immediate gratification, Dias said. But the company realized it was taking a risk in breaking new ground in retail services, she added. “It was heretical at the time, because why would someone buy online and pick up in a store?” Dias said. “But we decided to be a pioneer and just do it.”

To make it all work, Circuit City built an IT system for local store inventory integrated with its order management system, so that online shoppers could see which stores had their desired products available for immediate pick-up. It also developed an integrated system of e-mailing order confirmations and product availability notices to customers.

The program is designed to make products ordered online available for pick-up at a store within 15 minutes of the order. If employees at the pick-up store don’t enter a confirmation of the order into the integrated system within a certain time period, the system sends an automated reminder to store employees through the POS terminal. If more time goes by without a confirmation, the system alerts a call center rep who calls the store.

But even with an integrated system in place, Circuit City realized it also needed to implement a method of training and motivating store employees to effectively carry out their end of the operation. “It’s all about people,” Dias said. “If they can’t do it or won’t do it, it just won’t happen.”

Employee cooperation presented a major challenge, since Circuit City experiences a high turnover of store employees, who tend to be 18-25 years of age, Dias said. The answer has been in extensive employee training and constant reminders of store policies, plus an ongoing incentive campaign to make store employees realize the value of using the web as a customer service and sales tool, she said.

Circuit City has developed a system of granting credit for store pick-up sales to both online and store employees, who receive either a direct sales commission or credit for meeting sales goals. In addition, it has developed an internal “The Web is Your Friend” campaign to get store employees to think of online orders as a means of helping the entire company.

Dias said it’s also crucial to successful multi-channel retailing to review the effectiveness of multi-channel programs and re-work them when necessary. To leverage the web to expand in-store availability of products, Circuit City developed a technology system that let store customers order online products not available in-store for free shipment to their home within two or three days. Although the program seemed a natural for Circuit City, it hasn’t taken off as well as expected, Dias said.

“We should have been rocking and rolling with this one, but we only put a technology system in place,” she said. Still lacking was a complementary process for store employees to follow, and a formal system of training employees how to offer the service to customers, Dias said. “We just didn’t think it through all the way, so we’re back to the drawing board. We’re re-engineering the whole process.”

But Dias said it’s worth the trouble to work out the kinks in multi-channel programs. “It’s not easy to get the right recipe,” she said. “But hang in there. It can be a real plus when it does work and customers reward us with their dollars.”

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