March 24, 2006, 12:00 AM

Giving shoppers all the options

(Page 2 of 2)

It’s no secret that consumers are more valuable to retailers when they shop multiple channels, which is why retailers are investing more in infrastructure to support multi-channel shopping.

Retailers are tightening cross-channel integration efforts, according to this year’s “The State of Online Retailing,” an annual report by Forrester Research and Shop.org, the online retailing organization of the National Retail Federation. Some 63% of online retailers surveyed in the report, for example, have upgraded inventory management systems for better cross-channel supply chain management. 40% let online shoppers see on web sites the availability of in-store inventory, such as for in-store pick-up of online orders, which helps drive traffic and shopping between the web and stores. And 78% allow in-store return of items purchased online. ConsistencyAs a result, retailers have made strides in recent years in maximizing the multi-channel shopping experience. The goal: give shoppers a consistent shopping experience with desired products, value and customer service regardless of how they want to shop. The reward: Selling more products at good margins to customers who are more likely to come back for more.The retailers in the State of Online Retailing study reported that 46% of their online customers also purchase offline, and that 17% of offline customers make purchases on the web. Moreover, the web influences 15% of retailers’ offline sales, the study found. As a result, retailers are striving to integrate their stores and web sites, which signals cooperation among channels, the study says. While many retailers sell through at least two channels, some are taking on the challenge to develop new forms of multi-channel retailing. And that can only drive more sales, experts say. “We encourage our clients not to be confined to traditional definitions of multi-channel,” says Jim Okamura, Chicago-based senior partner of retail consultants J.C. Williams Group. Moreover, even what’s considered a single channel can actually be made up of multiple channels that retailers can exploit, says Scot Wingo, president of ChannelAdvisor Corp., a company that helps retailers sell through eBay and other marketplaces. Online retailers now routinely deal with three groups of outside forces–online marketplaces like eBay, comparison shopping sites and search engines, Wingo notes. Three channels, three challengesBut dividing the online market into three of its own channels presents new challenges for retailers, who must determine which online channel is best for its products and selling goals, Wingo says. He suggests that seasonal and fashion items sell better through search or online shopping malls instead of comparison shopping sites, while new consumer electronics usually work well in comparison shopping sites, malls and search. “Shopping comparison engines are not that great for apparel, so it’s better to use paid search,” he says, adding: “If the types of goods you’re selling are the latest and greatest items, then eBay.com and Overstock.com are not your channels.”Finding new multi-channel techniques can take some imagination, Okamura says. Target Corp., for instance, has launched special retail outlets designed around seasonal merchandise. In New York, Target has set up shop on a barge docked in the Hudson River, selling a special selection of summer goods for Manhattan residents headed for weekend get-aways. An advantage of setting up such “pop-up” stores, Okamura says, is that they can operate for a short time to serve any of several needs. While one pop-up might take advantage of spot market opportunities to drive incremental sales, another might serve to test new products or a new retailing concept, still another might be designed to build publicity.Even manufacturers get into the act. Cat food supplier Meow Mix set up a temporary “Meow Mix Café” in Manhattan for felines out strolling with their owners. “They never could have achieved the PR they generated through other means,” Okamura says. Customer-centricBluefly Inc., which sells designer fashion apparel at discount prices on Bluefly.com, has experimented with operating seasonal stores in New York’s fashion districts, where high traffic during the holiday season has helped it to reach out to new customers, the retailer says. “We’ll see more cases like that from retailers,” Okamura says. “They can use a pop-up store to test the brick-and-mortar market if they’re a pure-play or use it as an innovative way to build brand awareness.”Retailers are also learning to become more customer-centric in a multi-channel environment, going beyond the more conventional strategy of looking at the recency, frequency and monetary value of customers’ shopping histories, Okamura says. Best Buy Co. Inc., for instance, is testing in dozens of stores five separate merchandising strategies that each cater to a different customer segment, including suburban moms, the family man on a budget, the higher-income male and the early adopter of the latest technology. Lessons learned in the stores will help in devising ways to offer more personalized shopping online, says Sam Taylor, senior vice president of online stores at BestBuy.com. Other retailers, such as tiny but growing Auntie’s Beads, a retailer of jewelry-making supplies, started on the web and now analyzes web traffic to determine demand in particular geographic areas for its growing number of Auntie’s Beads stores. A single view of customer dataRetailers are also taking a closer look at integrating online, in-store and call center operations to better view and analyze multi-channel shopping behavior and, in turn, improve their multi-channel marketing and merchandising efforts, experts say. One of the results of this is the increased ability of retailers to get their online shoppers to also shop in their stores. “We’re seeing some of the most successful multi-channel strategies in the capabilities of retailers to drive traffic from the web to the store,” Okamura says. But getting more web shoppers into stores also raises the demand on retailers to improve their control of in-store stock levels as well as to operate on an integrated, multi-channel platform. And that means also leveraging the web to give store and call center personnel the information they need to serve customers. “There’s an increased trend of investing in cross-channel capabilities that are helpful to the store staff,” Okamura says. “That includes technology investment in inventory-lookup capabilities and POS systems that are web-enabled. Retailers are increasingly trying to gather customer data in the store, through e-mail, phone, etc., all things that can be integrated with the POS system.”So whether a customer shops online, on the phone or in the store, her shopping information is tracked, stored and analyzed, then fed back in the form of cross-selling and customer service applications. The online shopper sees more personalized displays based on her prior shopping interests; the call center customer is better served by reps with immediate access to information on past orders and shopping preferences; the store shopper is similarly served by the clerk at the POS counter, who may read on the POS terminal screen a personalized cross-selling suggestion, then suggest, for example, that the shopper may like to see a recent delivery of summer footwear to go with the apparel outfit she purchased.Justifying the investmentAs multi-channel retail technology and processes continue to evolve, there will be more consistency among channels, and more multi-channel shoppers, creating even more justification for further investing in multi-channel systems, Okamura says. “With more multi-channel shoppers, it makes it easier to justify investments, leading to a positive cycle of more multi-channel technology and processes, and still more multi-channel shoppers,” Okamura says. Wingo adds that the build-out of separate online channels will also present a separate set of opportunities and investment choices. “The blurring of the lines will continue, and that will help our customers,” Wingo says. EBay’s acquisition of online shopping mall Shopping.com, for instance, will make it easier for retailers who want a single partner for selling both seasonal, early-lifecycle products (on Shopping.com) and non-seasonal, late-lifecycle merchandise (on eBay). “That will help our retailers,” Wingo says. “But that will also require them to build more complex integration with that partner.”
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