August 1, 2005, 12:00 AM

Internet Retailer 2005: Report from the Conference

(Page 9 of 10)

Office Depot is still working to zero in on what, from the customer`s perspective, will be the best uses for web-enabled kiosks. But Maffitt notes that kiosks in stores are a trend to watch, citing a retailer where kiosks print out products in a gift registry and a map of the store and kiosks in Starbucks that expand the cafe`s offerings by letting shoppers buy music CDs.

The 3-phase multi-channel approach
Coordinating the Web Experience and the Store Experience
Mark Duff, director, Multi-Channel Programs, REI

Consumer cooperative and retailer REI launched in 1996, and has striven since to stay a step ahead of fast-evolving consumer expectations in its web execution. Today, that means tightening up multi-channel integration. "It`s not a game you get to choose to play," said Duff. "This is the new retail baseline."

Duff said REI has yet to completely nail the cross-channel experience, noting that it`s a moving target. However, it`s broken the effort into three phases. Phase one is consistency among channels in pricing, product information, brand presentation and customer service policies. "When you can`t be completely consistent, let the customers know why," he said.

Phase two is leveraging channel-specific strengths across other channels. "Each channel brings something different to the game," he said. Leveraging the advantages of each for the other channels at REI includes initiatives such as web-enabling contact center phone agents, expanding live help on the web and giving each store its own web page under`s store locator feature. Soon, added Duff, each store will post its own content to its page.

Phase three is blending different capacities of channels to create packaged experiences. In such a scenario, for example, a customer interested in snowshoeing might read an article about it on the site, call an REI agent to discuss equipment, learn from the agent that the local REI store is sponsoring a snowshoeing clinic, then go back to the web site to register for the clinic. After attending the clinic, the customer could get a one-day coupon for purchases online or in the store. Such packaged experiences represent "the next level of elegance in multi-channel retailing," Duff said.

Operations: Fulfillment, e-Payments and Customer Service


The fraud fighters
Taking Charge of Online Chargebacks
Maurice Nicholson, director, payment management, Columbia House
Jeff Foster, executive vice president, Retail Decisions
Mike Yakel, vice president, emerging products, Visa USA

How well an online retailer manages chargebacks and fraud can aid customer retention and help build profits, Jeff Foster, executive vice president at Retail Decisions, told the conference. "There are a lot of things in common between customer service and customer care and the transactions that you determine you`re going to accept or deny," Foster said. "And there`s a lot of customer care involved in how you manage chargebacks."

For instance, online retailers must use different procedures in reviewing international transactions from what they use with U.S. transactions, said Mike Yakel, vice president of Visa USA. "There is a different risk metric with non-U.S. transactions," in part because some of the risk tools aren`t available outside the U.S., he said.

But going overboard with anti-fraud measures on international transactions can mean missed sales, Foster said. "If you`re turning away 15% of your international business and we know that only 2% or 3% in a worst case is actual fraud, that`s an opportunity to increase your business simply by changing the way you attempt to prevent fraud," he said.

Automating chargeback resolution and fraud prevention also can generate more profits for a retailer, said Maurice Nicholson, director of payment management at Columbia House. When he joined Columbia House in December 2003, the company was paying card company fines of $20,000 a month for excessive chargebacks, Nicholson said.

But once it automated fraud review, chargeback rates dropped. "We fundamentally changed the economics of our credit card customers," making them more profitable, Nicholson said.

Finding fulfillment
Two Approaches to Outsourcing Fulfillment
Steve Craig, CTO,
Anne Kelly, president, Junonia

Outsourcing fulfillment can help an online retailer cut costs but it also can lead to customer-service and quality control problems. "With drop shipping, you gain a great deal of capital freedom," said Steve Craig, CTO of "If you don`t sell anything, you have no sunken costs." ShopNBC, a subsidiary of ValueVision, drop ships about 20% of its goods.

Outsourcing fulfillment also enables retailers to focus on marketing rather than operations, said Anne Kelly, president of Junonia, online retailer of plus size women`s apparel. Junonia began outsourcing fulfillment in 2001. "We create products and we market them to our customers," she said. "For us, it was really important to focus on what we did well."

But outsourcing also has a downside. "The difficulty is how to maintain quality at a distance," Kelly said. Retailers can test quality control by performing test orders, Craig said. They also need to question fulfillment centers upfront about their ability to ship different size items, for example, treadmills or mattresses, he said.

Retailers also shouldn`t underestimate the costs of moving to third party fulfillment. "You can assume that every time you make a change to your fulfillment, it`s going to get messed up," Kelly said. "You should count on losing at least half a month`s revenue."

What`s more, outsourcing fulfillment can lead to a lesser margin. "If you`re not willing to take inventory risk on a large buy, you`re not going to derive as high a margin as you would if you took receipt of those goods," Craig said.

Selecting a delivery service
Delivery Options: Finding the Most Expedient Order Delivery Service
Beth Enslow, VP, enterprise research, Aberdeen Group
Alison Castle, vice president, operations, eToys

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