December 10, 2003, 12:00 AM

Multi-channel organization should differ by retailer type, Forrester says

Fixing online merchandising in isolation doesn’t serve a multi-channel strategy. Retailers should centralize merchandising across channels--or not--depending on their value proposition to customers.

Online retailers have taken strides to improve their merchandising metrics and results show it, according to new findings from Forrester Research Inc. For example, Forrester reports that an investment in site analytics has paid off for Petco, which has seen a gross margin increase of 100% in online SKUs for which it uses the tools to analyze conversion and make pricing and promotional adjustments.

But as merchants move to the next level of online merchandising and try for greater cross-channel merchandising consistency, technology and organizational issues are throwing up roadblocks, Forrester says. For example, cross-channel merchandising and buying groups formed by some retailers may create redundancy in the organization, assign merchandising duties to technology staff ill-equipped to handle it, or burden on less tech-literate merchandising staff.

Recognizing that improving online merchandising alone doesn’t serve a long-term multi-channel strategy, retailers must build the right mix of merchandising people and technology, Forrester says. To accomplish that, they should review their value proposition to customers, define their profile, and choose the combination that supports it. For example, retailers such as such as Eddie Bauer that sell products by selling lifestyle should maintain both web and offline merchandising groups. In a category where merchandising skills drives sales, product display, content and cross-sells across channels can’t easily be automated by technology, Forrester says.

By contrast, retailers like Wal-Mart that win on price alone can automate some merchandising functions to a greater extent with investment in the technology and technology staff to do so. For such retailers, a centralized merchandising function that plans, buys and reconciles price and product information across all channel makes sense, Forrester says.


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