Triple-play Merchandising

Today’s multi-channel shoppers are increasingly savvy about picking up differences among channel offerings—and that can have a harmful effect on sales and expenses, analysts say. Randy Covill, senior retail analyst with AMR Research Inc., cites a recent misfire at a major retailer he won’t name. A point of purchase display offering customers a free toy with purchase when ordering online had shoppers bailing out of store checkout lines to go home and log on to make the same purchase on the web. “It had seemed like a good way to drive people to the retailer’s web site,” says Covill. Instead, it became a hard lesson in cross-channel management.

With opportunities to leverage channel differences on the one hand and arguments for channel consistency on the other, what’s a multi-channel retailer to do? The short answer is, nothing radically different—at least on the surface—in the web, store and catalog assortment and presentations. Kmart Corp.’s stores and its BlueLight.com web site were on two different tracks, and shoppers struggled with the mixed message. It was one of many problems that drove the retailer into bankruptcy in January, analysts say. “BlueLight ended up being a great vehicle for giving away web access but not a great vehicle for selling merchandise or getting people into Kmart stores,” says Ken Goldberg, managing director of the consulting firm AnswerThink. “Contrast that with Target and Target.com, which has consistent messaging and offers a consistent customer experience.”

That said, savvy merchants are discovering it pays to dig down deeper into what defines “consistency” among channels in the shopper’s view. While successful cross-channel merchandising demands that a retailer give customers the sense they’ve had the same brand experience whether they’ve shopped the store, catalog or web site, retailers are finding there’s plenty of room for differences and ways to harness each channel’s unique strengths under the brand umbrella.

“The trick is to define what your brand is about and stick with it,” Goldberg says. “If you’re about incredible prices, then you have to have incredible prices everywhere. If you’re about incredible service, then you need to carry that through.”

Visual presentation also is key to unifying the perception of brand across channels. “When you talk about brand imaging, things like logos need to be consistent—fonts, colors, copy voice, things that people associate with the brand visually,” says Sally McKenzie, division vice president, interactive media at The Spiegel Group’s EddieBauer.com, a retailer with one of the longest tenures online.

The core merchandise offering and basic price value are other critical elements that need to be consistent among web site, catalog and store to convey brand. “At the end of the day, the online store needs to support the value system of offline channels,” Cassar says.

While image, presentation, core merchandise and price-to-value ratios need to match up to convey brand across channels, that still leaves plenty of wiggle room. “Those are some of the pieces that need to be consistently communicated to the consumers, but how that’s done in different channels may be quite different based on what you’re trying to accomplish and maximize in terms of the channel’s properties,” says McKenzie. “Our home page, for instance, doesn’t look like the catalog cover because that wouldn’t be an appropriate use of consistency. But there are elements of both the catalog cover and store signage in our home page.”

And while similar, the online product offering doesn’t necessarily have to be identical with offline offerings. Matching up assortments across store, web and catalog is less of a problem for retailers such as The Sharper Image, whose product line centers mostly on gadgets of which an increasing number are private label. It can be more problematic for an apparel seller, for example, who must factor in regional and seasonal differences and fluctuating stock levels from manufacturers over which it has no control.

When to break ranks between online and offline offerings has been a key learning among retailers in the last few years. Some do it strategically in short runs, using the web’s speed and reach to test products in advance of when they roll out in stores, for example, or to move small amounts of end-of-season merchandise it’s not practical to put in a catalog. “You may be down to your last few sizes and colors and it’s just not profitable to send out a catalog with those odds and ends in it,” says McKenzie. “And once the sale catalog is out there, letting customers know about further price reductions is difficult. Moving more of our liquidation in the direct channel online takes advantage of the flexibility that channel offers.”

“Wal-Mart once may have thought it had to learn how to economically sell Rubbermaid containers and plastic bags on the web,” Cassar says. “Now that the Internet is seen less as a dire threat to offline business and more as an interesting sidebar, that’s changed. It’s apparent that while some online retailers will want to sell their entire offline assortment on the web, that may well be the exception to the rule.”

The rationale for precisely matching online and offline offerings—or not—also depends in part on the scope of the retailer’s product assortment. Pet food, for example, has become a classic example of a bad fit for online merchandising—just look at what happened to Pets.com. With a poor weight-to-value ratio, dog chow is pricey to ship compared to the revenue it brings in. It makes sense to split it off from a web site to a store-only offering. On the other hand, The Sharper Image, with an assortment that’s more tightly focused than Wal-Mart’s and that affords higher margins than pet supplies, finds it pays big branding dividends to make all of its products available in every channel.

While keeping web, catalog and store presentations enough in line not to bump into the brand, multi-channel retailers are beginning to learn to leverage each channel’s unique properties. “Increasingly, the web is seen primarily as something that supports traditional channels, and secondarily important in its ability to drive sales. That’s flipped from the conventional wisdom two or three years ago,” notes Cassar.

Cross channel merchandising takes more than just knowing how to convey consistent branding across channels and identifying the opportunities of each channel—it takes knowing how to knit it all together in an integrated strategy in which the channels play off each other to best advantage.

Teen retailer Delia’s in January launched its most ambitious cross-channel effort to date. The web has quickly grown to represent about 50% of Delia’s direct business, which itself is half of Delia’s sales, but the strategy for the promotion, which featured international rock star Shakira, combined the unique strengths of each channel to build interest and capture sales.

The catalog focused less on content about the singer and more on the merchandise, with photography that further showcased Shakira’s Bohemian-inspired look.

The stores let shoppers interact with the merchandise in 3-D and helped customers assemble the style for themselves. In addition to giant blow-ups of the photo image of Shakira that appeared on the spring catalog cover and on the web site, store windows launched the promotion by featuring the Delia’s clothing that the singer wore in those images. Other articles of clothing that are part of the same fashion trend were featured in the front of the store, near the front of the catalog and a click away from the home page. Later on, during the three-to four-week promotion, store windows rotated displays to feature other outfits reflective of Shakira’s style. For added buzz, Delia’s cross-promotion even went outside its own distribution channels to find other partners: it worked with
Epicrecords.com and Sony.com to time its fashion promotion to the U.S. launch of Shakira’s latest recording.

“Our web site is a hybrid of our store and catalog,” Chasin says. “The catalog visits our teen customer in-house. It’s a mobile experience she can take to school, read in bed, share with friends. The most social of the experiences in the store, where she can talk with sales associates and friends about how to put the merchandise together.”

Besides taking the lead in one aspect of the promotion, each channel also drove shoppers to the other channels to get the rest of the experience, which helped align them further with the brand, the singer, and the featured merchandise. The catalog directed shoppers to the web site or a store to enter the contest. Both the catalog and web also provided information about a special gift-with-purchase offer. Store signs encouraged shoppers to visit the web site to download the video clips.

Retailers have always known that brand matters, but if anyone needs any more proof, here’s a finding from AMR’s recent survey of online holiday shoppers: 85% chose to make purchases at the web sites of major branded retailers. But the expression of the brand on the different channels, and particularly the web, is taking new turns as merchants test the opportunities of each. Once retailers have a good handle on that, the next challenge is figuring out how to best combine the power of the three. What’s clear already is that any multi-channel merchant who still treats the web site, catalogs and stores as stand-alones will increasingly miss opportunities and eventually find himself looking at the back end of the competition.

Retail analysts say the day of combined channels is not here yet, in part because of legacy systems that hinder easy information exchange across channels. But it could be around the corner.