September 29, 2006, 12:00 AM

The Views from the Top

Retail CEOs foresee a shift in 2007 to a focus on customer service, site personalization, latest technologies and improved multi-channel integration.

Philip Schoonover has become a believer. “Years ago, I was in denial about Amazon.com and other pure-plays and the sales they were generating. But not anymore,” says Schoonover, chairman, president and CEO of Circuit City Stores Inc.

Now firmly ensconced in Internet retailing, Schoonover is looking to 2007 and crafting a strategy that places the web at the center of Circuit City’s success with an aggressive policy that guarantees fast pick-up for merchandise ordered online and an investment in new technology that replicates the online shopping experience in stores. “Retailers that continue to treat sales channels separately and don’t look at shopping from the customer’s point of view will lose,” Schoonover says.

In his approach to 2007, Schoonover is typical of many retail executives. Effectively interweaving a web strategy with other channels is one area that most of eight CEOs of retailers in the Internet Retailer Top 500 Guide to Retail Web Sites plan to invest in for 2007. The other areas that are grabbing the CEOs’ attention for next year are: broadening and improving customer service; increasing personalization of e-commerce sites; and implementing the latest web technologies (such as RSS feeds and online video) that best suit a retailer’s customers and product offerings.

In-store Internet
When it comes to having a presence in more than one sales channel, Circuit City, No. 17 in the Internet Retailer Top 500 Guide to Retail Web Sites, has conducted business in multiple channels for years. However, the company is in the midst of making significant changes to bring it in line with Schoonover’s forecast of the need to better integrate channels to perfect the overall shopping experience.

Circuit City, for instance, is guaranteeing that in-stock items ordered online will be available for pick-up in a store within 24 minutes of when the customer places the order. It also has launched a test program that enables sales associates and shoppers in 10 stores in Boston and 10 in Florida to use wireless, web-enabled tablet PCs to study product specifications and compare products and prices as they walk through a store. “We’re creating a new kind of in-store experience, bringing the power of web content into stores,” Schoonover says. “Customers can study the specs online while simultaneously touching products in a store.”

The merchant also has been changing its entire business structure to break down barriers between channels by investing in new or more call centers, catalogs and web-selling technologies and changing the psychology of the company and its employees. Its chairman adds that the retailer is far from done with its efforts to better weave together sales channels to best satisfy the wishes and needs of customers. “Executives must force this mindset throughout their organizations and remove obstacles constraining this strategy,” Schoonover says. “Re-examine compensation, look at company structure, identify and promote employees who understand and advance the philosophy and hold them up as a new generation of leaders. Dig in and change the mechanics of the company.”

There is no choice for retailers of any stripe: They must charge forward with a strong plan to be multi-channel in some way and effectively bind their channels together, argues Eric Faintreny, chairman and CEO of Redcats USA, No. 28 in the Internet Retailer Top 500 Guide to Retail Web Sites. The e-commerce and catalog retailer primarily sells in the fashion category but also operates in the home and gifts categories.

“All the major retail players are looking into this in one way or another. Moving forward they are obliged to rethink the organization of their company and the integration of the Internet channel with other channels and internal processes,” Faintreny says. “We are in the midst of a revolution right now, one that demands change.”

The pressure continues
While pure-play web retailers, because of their pioneering efforts in the channel and experimentation with valuable new technologies, continue to pressure multi-channel and catalog retailers to rethink strategic plans, this situation will reverse itself in the not-too-distant future, Faintreny predicts. When web sales growth slows and the channel settles a bit, he adds, the differentiator in the industry will not be which merchants have the best sites but which ones offer the best products, overall shopping experience and customer service.

Moving forward, cultivating extraordinary customer service, especially for the online channel, and using that as a marketing and customer acquisition and retention tool is a must, most of the CEOs say.

Strategically speaking, changing the primary focus from web site construction and infrastructure to developing deeper and richer relationships with customers is a very important goal for the Internet sales channel in the years ahead, says Anthony Boldin, president and CEO of AtomicPark.com, a pure-play web retailer of software and other computer products. The company is No. 207 in the Internet Retailer Top 500 Guide to Retail Web Sites.

“Most people in the industry still view e-commerce as making efficient transactions. But most e-retailers are pretty competent in this area now that they have had the resources to acquire and implement the fundamental technology they need. The bottom line: Efficiency is not the reason the Internet exists,” Boldin says. “So now that there is a solid technological foundation, to succeed e-retailers must notch up customer service efforts to the point where they can treat online shoppers the same as if they were shopping in a store. When customers are at a web store, they’re not there to rush through a transaction-they want to find the products they’re looking for.”

2007 will be a year when more Internet retailers truly realize they must turn from more conventional concerns like e-commerce platforms and learn to better stay abreast of what shoppers and customers want, says Ryan DeLuca, CEO of Bodybuilding.com, a pure-play web retailer of fitness products and services. The company is No. 163 in the Internet Retailer Top 500 Guide. “Further, retailers can so quickly get sidetracked with new technologies and such things that ultimately are not as important as serving the customer,” he says. “Executives can lose focus very easily. The whole point of what we do is to provide customers with desirable products and services.”

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