December 29, 2006, 12:00 AM

Come Back Here

The multi-channel shopper paradox: big spenders, little loyalty.

Multi-channel shoppers are valuable to merchants in a very literal sense: They spend more money and do so more

frequently than shoppers who confine their buying to one sales channel. In 2005 they generated about $125 billion in offline sales, according to

Forrester Research Inc. These shoppers spend up to 50% more than single-channel shoppers and usually buy bigger ticket items like electronics,

appliances and computers; offline sales of these items to multi-channel shoppers, for example, hit $44.5 million in 2005, Forrester Research

says.

However, despite spending more and purchasing with greater frequency, multi-channel shoppers tend to be less loyal than their

single-channel counterparts, according to research firm Gartner Inc. The two primary reasons are that multi-channel shoppers are more price

sensitive because they use the online sales channel to conduct more price comparisons, and they have higher expectations for customer service. In

customer service, for example, any perceived shortcoming in the shopping experience is apt to send a multi-channel shopper elsewhere, Gartner

says.

“Retailers need to be aware of these characteristics in multi-channel shoppers because they open the door to decreased loyalty,”

cautions Hung LeHong, research vice president for retail at Gartner.

Retailers remain eager to capture more sales and loyalty from

multi-channel shoppers. Merchants such as Circuit City, Best Buy and Sears Roebuck and Co. have launched programs enabling shoppers to buy

online and pick up in store. The tactic serves not only as a way to bring online shoppers into the store where they might continue shopping but also

to encourage shoppers that frequent the store but often lack the time to spend browsing to experience the convenience of shopping online. So strong

is this drive to encourage multi-channel shopping that Sears specifically promoted the ability to order online and pick up in store through a

television ad campaign during the holiday shopping season.

These programs have proven so successful that other retailers are moving

down the same path. Radio Shack, for instance, joined the club in November. The electronics retailer is piloting a ship-to-store program in 1,300 of

its company owned-stores and plans to roll out the program to its remaining 3,400 later this year.

Encouraging

cross-selling
“Multi-channel shopping strategies are about driving consumer behavior to encourage cross-selling,” says Jimmy Mansker,

vice president of RadioShack.com. “The aim is to get consumers that shop online into a store where they can interface with a sales representative

that can introduce them to accessories for the purchase, and get store shoppers onto the web site where they can access a much larger

catalog.”

Given the small footprint of Radio Shack stores, 2,500 square feet, shoppers see slightly more than 3,000 of the 20,000 SKUs in

the retailer’s catalog. A major reason behind the decision to launch the ship-to-store program was that Radio Shack regularly rotates select items

carried in store to its e-commerce site to keep store inventory fresh. “We always want to have the right items in the store, but not eliminate those

items moved off the shelf from the catalog,” Mansker says.

Customers who come to Radio Shack in search of an item only to discover it is

no longer on the shelf may subsequently leave the store unhappy, which overall can have a negative impact on customer loyalty. To encourage

these shoppers to move online, Radio Shack sales representatives direct shoppers to the web store. “We gather a lot of field data from store

managers about what items shoppers are being directed to buy online,” says Mansker, who adds that the information influences online product

placement and promotion.

Understanding how shoppers move between sales channels and use each of them to arrive at purchasing

decisions is critical to retailers seeking to grow their base of multi-channel shoppers, experts say.

Office Depot tracks customer behavior

across all sales channels and uses it to better leverage each touchpoint with shoppers. Marketing efforts are coordinated across each sales channel to

ensure a consistent marketing message without sending an overwhelming amount of promotional materials.

The coupon’s in the

mail
To encourage single-channel shoppers to become multi-channel shoppers, Office Depot mails or e-mails customers coupons that can

only be redeemed in a sales channel they do not use. The tactic has proven effective, says Kristin Micalizio, vice president of direct sales at Office

Depot, though she declines to be more specific. “Customers like a deal regardless of the redemption channel.”

Other strategies used by

Office Depot to encourage multi-channel shopping include placing notices on store shelves when an item is out of stock directing shoppers to the

web store. “No retailer likes to be out of stock, but this is a way to let shoppers know they can find what they want through another sales channel,”

says Micalizio, who adds that each store is equipped with a kiosk to access the Web site.

Increasingly, many consumers are broadening

their use of the web to gather information prior to making purchasing decisions. About 55% of multi-channel shoppers research a product online

then buy it offline, according to Forrester Research.

Take off
This process can take multi-channel shoppers beyond a retailer’s site

and off to comparison shopping sites, blogs, social networking sites and other sources that include customers’ reviews of products and even the

retailers. “Retailers not looking at emerging sources of information that shoppers are tapping into can miss out on better serving the multi-channel

shopper,” says Gartner’s LeHong.

A Gartner report on multi-channel shoppers due out later this year reveals that multi-channel shoppers

often will use multiple sources of information to arrive at a purchasing decision. While in-store visits rated highest at 70%, word of mouth and

product reviews tied for second with 45% each. The Internet overall netted 31% and advertisements received 25%.

If the image or

marketing message presented to consumers across shopping channels is inconsistent, it can adversely affect customer loyalty to one or more sales

channels. That was a problem Famous Footwear recognized and set about addressing last year with its “More Shoes, More Ways” campaign. The

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