Retailers shift their ad spending from TV, radio and print ads to digital ads.
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A little more than 50% of shoppers at QVC.com have heard of it through QVC TV, which makes the TV channel “a great advertising tool for the web site,” Hamlin says. “But we don’t try to persuade people to shop one channel or the other. We want them to shop both—that’s our best customer.”
By Andrea McKenna
It’s no surprise that outdoor gear co-op Recreational Equipment Inc. has been so adept at integrating channels; it’s been a multi-channel retailer since before multi-channel was the hot new approach to selling. Even 36 years ago, when president and CEO Dennis Madsen started with the company, REI stressed its reach in two worlds. “We were taught to be a cataloguer and a retailer at the same time, and they have very different channels of distribution,” Madsen says.
With a direct sales channel of web and catalog that accounts for $116 million, 16%, of $740 million in sales, and 61 stores equipped with 124 web-enabled kiosks, REI is one of the few retailers that can claim to sell in four channels. The key to REI’s strategy is that it has defined each channel’s role very clearly. The retail store is based on visual presentation of an assortment of products and the sales associates’ knowledge. The catalog extends its reach, but limits the information that it can communicate to customers. Thus it needs the discipline to put all the relevant decision-making information in a finite area. But that hampers REI’s approach to selling. “There was pent-up demand from catalog and retail customers for a comprehensive catalog of all products in our inventory,” says Madsen. “But it was economically and practically impossible to put out a paper catalog with 70,000 items in it.”
And so REI recognized almost immediately the web’s ability to combine the knowledge of the store associates with the reach of catalogs. REI was one of the earliest adopters of the web, launching a site in 1996. But it didn’t stop there. Why not use the web in the store, REI executives wondered. And so, just as it was a pioneer on the web, it became a pioneer with store kiosks in 1997, bringing its approach full circle by incorporating the Internet into the store. “The Internet has become a very critical part of our operation, not only to reach customers in their homes but in the stores as well,” Madsen says.
The kiosks provide the depth of information available on the web while helping to save sales by making available not only what a store is out of but also what the store couldn’t carry in the first place because of lack of demand or size restrictions. REI says the kiosks contribute sales equal to a 25,000-square-foot store. Madsen says REI will continue to expand its kiosk program and eventually provide wireless technology for sales staff to get stock and product information even faster from anywhere in the store.
One of the reasons REI has been quick to recognize the value of the web in store sales is that Madsen himself has seen the importance of providing information at the moment a customer wants it. REI founder Lloyd Anderson hired him as a weekend sales associate when Madsen was a senior in high school. “I had the opportunity to work in dozens of different jobs as the company grew,” Madsen says.
The web plays a unique role for REI because of the nature of the information REI provides to customers, says Neil Stern, partner at McMillan/Doolittle, Chicago-based retail consultants. While all retailers would like to provide more information to customers, the information that REI provides is literally a matter of life or death, he notes. With the perils of such outdoor activities as trekking and mountain climbing comes a responsibility for participants to be informed about the right gear.
REI shoppers need to know, for instance, how much weight a pack can carry and if a sleeping bag can withstand temperatures of -20 with 50 mph winds. Further, Stern notes that because REI started as a cooperative, which was a non-competitive atmosphere, REI was not spooked by channel cannibalization. “It’s not about whose turf they’re stepping on, it’s about providing the maximum amount of information a customer needs to purchase a product,” he says.
Madsen’s experience again feeds into the level and quality of information that REI provides. If anyone understands the importance of knowing the strength of a mountain-climbing line or how warm your sleeping bag can keep you, it’s Madsen. He spent part of April and May trekking in the Himalayas.