Less than a month into the New Year and the e-retailer and marketplace announces plans for three additional U.S. fulfillment centers.
Successful multi-channel retailers capitalize on what they do best. Sears does that better than most.
In a way, multi-channel retailing was an easier proposition back in the days when web sites were tacked onto existing catalog and store brands as essentially stand-alone operations: no system or software integration issues, no cross-marketing coordination--but ultimately, no synergy. Though requiring the cooperation of fewer moving parts, it was an approach that viewed the Internet solely as a sales channel and left untapped the rest of what the medium potentially had to contribute.
Today, the notion of what constitutes a multi-channel strategy has evolved. The best approaches represent both a philosophy--integration where it makes sense, while letting individual channels lead in arenas where they`re equipped to excel--and a set of tactics that execute that approach. Guided by that philosophy, retail`s biggest multi-channel players are learning to leverage the web for more of what the medium is uniquely qualified to do as a consumer research tool, promotional platform, store shelf extender, customer acquisition vehicle and more.
Not just an add-on
Retailers have come to recognize that, while at less than 10% of all retail sales, online sales remain the tail wagging the dog, the online channel`s utility to the total marketing effort is more significant than the numbers might suggest. They`ve realized that rather than simply an add-on or just another outlet, it can be a key part of what knits a multi-channel strategy together.
But that`s not without jumping through a lot of hoops to get there. At a National Retail Federation panel last year, Kirshnan Menon, executive vice president of global business development at Carlson Marketing, ticked off the requirements of an effective multi-channel strategy, and they are many: store pick-up of online orders, the ability to return purchases to any channel, cross-channel customer identification, brand consistency, and integrated, consistent offers across all channels.
The commitment and resources required to bring that about have left attempts at true multi-channel integration largely the province of retail`s giants, and in fact, one of retail`s oldest names has quietly scaled many of those hurdles. Though much of the bigger retail industry fanfare around Sears, Roebuck & Co. recently has concerned its moves in the offline world, such as its purchase of Lands` End two years ago and its announcement last year of a merger with Kmart Holding Corp., Sears was also a leader in putting some of those multi-channel integration initiatives into practice. The practical execution of one of the stars of its multi-channel strategy--in-store pick-up of online orders--is rated by some consultants among retail`s best, for example.
Sears had $41 billion in 2003 revenue across all its business segments. It does not break out revenue for Sears.com, instead folding it into the $36 billion revenue from all merchandise sales and services it reported in 2002, in addition to the $5 billion it reported in revenues from its credit and financial services business. Internet Retailer has estimated revenues from Sears.com in the range of $1.2 billion. It`s clear that online sales don`t drive the train at Sears: with nearly 900 full line stores and 1,000 specialty and dealer stores, it remains first and foremost a store-based retailer. Given its ability to find the right products--an issue that keeps Sears experimenting with its soft lines offering--its biggest growth opportunity in terms of sales volume is on land rather than online.
And that`s OK with Sears. Bill Bass, vice president and general manager of Sears Customer Direct and senior vice president of Lands` End, says the company is channel-agnostic. If an effective multi-channel strategy is a philosophy and a set of tactics, there`s also something it is not, in the view of Sears: a reason to try to push consumers to purchase in one channel over another. "You have to let each channel play to its strengths," Bass contends.
The multi-channel strategy at Sears has always been focused on making it easier for customers to purchase however they want to, he adds. And besides ringing up sales on its own, the web`s real utility to Sears under that strategy is the many ways in which it makes that possible.
Retailers have promoted in-store pick-up of online orders since 1999, with Sears one of the first multi-channel retailers to offer the option. It`s been estimated that one in four Sears customers who picks up an online order in-store winds up making an additional purchase once they are there. Nevertheless, Bass says the primary reason Sears took steps to incorporate in-store pick-up, including the considerable data integration required on the back end, was for the convenience of customers.
One of the best
With convenience often making the difference in whether consumers buy at one retailer over another, how effective is in-store pick-up at getting consumers to choose Sears? According to Bass, 40% of the customers who order online choose store pick-up. While the availability of store pick-up at Sears may not have driven the purchase decision for all of these shoppers, it`s a safe bet that it made the difference for some.
Consultants such as Chicago-based E-tailing Group Inc. president Lauren Freedman say Sears` in-store pick-up feature is one of the best executed in a--so far--small universe of multi-channel retailers who`ve made it a part of their online offering. "Their e-mail notification has customer-friendly instructions, and the process once you get to the pick-up area is user friendly," she says. "The sales associates are attentive and ask you if you need help." Freedman`s only criticism is that returns of online orders picked up in-store require the shopper to go to the store department involved and can`t be returned at the point of pick up.
Long term, she believes, the feature will have strategic value as a differentiator among multi-channel retailers. "Not many retailers have it now, but this is going to be an expectation among consumers. So it`s going to be something that really benefits retailers who offer it," she says.