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Customers are coming across the channels in droves. And with these inter-channel barriers falling fast, online retailers must be ready to serve their customers regardless of how they arrive.
What pure-play e-retailing was to last year, multi-channel is to this year. Everyone’s talking about it; it’s the future of retailing and every retailer wants to be a multi-channel seller. But just because it’s popular and a buzzword, doesn’t mean it doesn’t have legitimacy. And this looks like one hot new trend that has staying power.
“Customers are clearly voting with their dollars,” says James Okamura, senior partner at Chicago-based consultants J.C. Williams Group. “They want a retailer that gives them channel choice, and the customer demanding that is not just any old customer-it’s the best customer.”
The combination of cross-promoting web sites, catalogues and brick-and-mortar stores to reach consumers when and where they are ready to shop is becoming the new way of retail marketing. Today, chain stores operate web sites and have kiosks in their stores to access those web sites, web retailers have stores, both have catalogs to bolster sales in all channels and catalogers have web sites and stores.
And while it was once thought that the new Internet channel would cannibalize store and catalog business, that is not the case. While no one has numbers yet of how many shoppers are crossing channels, those who do are proving to be valuable customers. A report from J.C. Williams Group shows that consumers who visit a web site and then buy from a retail store spend 33% more on an annual basis in stores than a retailer’s typical store customer. Similarly, consumers who visit a retailer’s web site before buying from the catalog spend 20% more on an annual basis from the catalog compared with a typical catalog customer. Retailers with an eye toward integrating the shoppers’ experience can use each channel to promote the other, a path that many retail analysts say is the right one for sales.
Just as consumers are modifying their shopping habits in response to having three-channel choices, retailers also must restructure how they operate to take advantage of these trends. “Retailers are changing their business processes and everyone has their own version of how they are integrating the operations of these channels,” Okamura says. On the front end, retailers such as REI, Circuit City and Barnes & Noble are adding Internet kiosks to their retail stores to give customers the option of finding and ordering merchandise that is not in stock in the stores. Spiegel Group, which operates Spiegel, Eddie Bauer and Newport News brand stores and catalogs, is overhauling its backend merchandising and warehouse systems to allow integration of all the channels. Such integration will help Spiegel see in which channels customers are shopping and what they are buying so the company can streamline merchandise planning.
The holistic view
Although many retailers are implementing multi-channel tactics, analysts say the most important factor to success is identifying customers who shop the different channels-and retailers have a long way to go to achieve that. Katherine Kress, senior consultant at Peppers & Rogers Group 1 to 1 Marketing, says 76% of multi-channel retailers cannot identify their customers as they shop in different channels. “Retailers need to be able to tag and identify customers in all channels. They need an integrated database,” she says. Retailers must have a holistic view in order to see how the marketing in one channel can mean sales in another channel, as opposed to viewing off-line, online and catalog as three separate businesses.
However, identifying customers in all the shopping channels is a retailer’s biggest challenge, says Scott Hardy, managing director for KPMG Consulting LLC’s retail and distribution practice. “You don’t know who they are until they identify themselves to you. Retailers must give customers value and a reason for them to tell the retailer where they’re shopping.” Currently, retailers can ID customers by loyalty programs, purchase history, credit card transaction, zip code, phone number, customer source codes on the backs of catalogs and through web site registration. However, technology vendors are still developing systems to allow retailers to drill down into information to get a picture of where and how customers shop in different channels.
Using multi-channel marketing and merchandising strategies to drive sales is just the beginning and the strategies vary. Retailers have attacked the multi-channel path in different ways. Eddie Bauer, for instance, was among the first to build a web site. And in 1999 it was among the first to describe its retailing approach as multi-channel. In that year, it began to promote its web site on receipts, store bags and catalog pages. Since then, many of these ideas have become standard. Eddie Bauer’s web sales have helped partially offset a decline in its traditional retail channels in recent months: Web sales soared in the five-week period ending Dec. 31, 2000, rising 94% over the year-ago period, even as catalog sales grew only 4% and retail store sales declined 4% from the same period last year.
In terms of integrating its shopping channels, Eddie Bauer was ahead of the curve here too. The retailer started integrating catalog and retail businesses 10 years ago when it saw it would be important to allow customers to make catalog returns at its stores. The company applied that same strategy to its web business when it launched in 1998, says Mark Staudianger, vice president of direct sales. Today, Eddie Bauer is integrating its business so it can have real-time inventory information and a customer database that cuts across all channels.
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