For web ROI, multichannel sellers should look beyond profits, Jupiter says
Web site profitability is elusive for many bricks-and-mortar retailers–-but that shouldn’t necessarily be their primary yardstick for measuring return on their web site investment. “A holistic view of Internet benefits dramatically changes the picture,” Jupiter Media Metrix analyst Ken Cassar told web merchants and others assembled for the Jupiter Retailing Forum in Chicago Monday.
If return on investment equals the total financial benefit that web sites create against investment required to create that return, multichannel retailers who don’t measure site development and maintenance costs against other benefits are missing the boat, Cassar argues. Retailers should look beyond online profits to other web-generated cost and revenue data, including the web’s ability to influence offline sales, improve payroll productivity and speed up inventory turnover. The web plays a key role in encouraging offline spending, with online activities influencing an estimated $498 billion in offline sales by 2006, Jupiter predicts, far outpacing a projected $130 billion in online transactions. Online influence is particularly strong in certain retail categories including home improvement, where it influences an estimated 89% of considered purchases, and grocery, at 32%.
The web can also deliver benefits in terms of improving staff productivity through its online CRM function, as it’s positioned to take up the slack as bricks-and-mortar stores reduce costly selling floor personnel. The web also can accelerate inventory turnover through its use of a virtual supply chain. "And there’s no need to make shelves look full,” Cassar says, noting that bricks-and-mortar stores often carry inventory over their need for the sake of appearances on shelves. Barnes & Noble, for example, turns its inventory an estimated 2.7 times per year, while Barnes & Noble.com turns stock 9.2 times each year. The web also delivers for multichannel retailers less tangible benefits such a brand development, market share defense, data capture, and target marketing opportunities, all of which should be figured into calculating ROI.
But there’s no one yardstick for determining those benefits and matching them with investment that’s right for every retailer. “That depends on a thorough analysis of the quantifiable and non quantifiable benefits for each retailer,” Cassar says. To achieve that, retailers can start by estimating Internet benefit wherever it can be quantified and determine the necessary ROI parameters, he says. “Then let the numbers tell you how much to invest and how to spend those funds.”
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