To hear some people talk, you'd think that the Internet--and by extension, e-commerce--is a parallel universe or an entirely new dimension. Some of that sentiment may be a vestige of the dot-com boom, when many Internet-only retailers--the ones that considered traditional bricks-and-mortar retailers as slow-moving dinosaurs on the verge of extinction--thought they could survive on Internet sales alone. The only thing that's extinct now is this ridiculously arrogant vision.
The reality is that e-commerce is one channel among many and, as such, it should not be isolated from the more traditional channels. Yet, while those "dinosaurs"--the retailers that sell through multiple channels--seem to be having the last laugh, the "compartmentalization" of e-commerce persists. That's because many companies still separate their online operations from their business as a whole. These outfits make the mistake of judging the success of their e-commerce sites only on the basis of independent sales and profits--rather than considering the cumulative benefits across channels.
"Customers choose to gather information and purchase in multiple ways for various reasons," says John McCallum, vice president and research director at GartnerG2. "You must have a presence in multiple channels to reach them."
Developing a successful multichannel strategy is one of the most important challenges all retailers with a Web presence face. That's because multichannel shoppers spend significantly more than single-channel customers. AMR Research reports that multichannel customers spend three to five times as much as people who shop through only one channel. A GartnerG2 report found that Eddie Bauer's multichannel customers spend several times as much as single-channel customers. J.C. Penney and Staples experienced similarly large increases among their multichannel customers, according to the same report. A Shop.org study found that cross-channel shoppers spend 50 percent more and visit stores 70 percent more often than the average shopper. The study also found that 51 percent of online shoppers who received a retailer's catalog in the mail searched for or bought something online that they had seen in the catalog. In addition, 27 percent of store shoppers looked for or purchased merchandise online that they had seen in the store.
A multichannel strategy lets companies and customers take advantage of the strengths of the different channels. Shoppers can visit the Web site at their convenience to find the information they need to buy a product. The benefits to retailers are obvious. Customers who walk into stores after researching products on the Web may have already reached a buying decision--meaning they're more likely to make a purchase than just kick tires. Customers who know what they want are also less likely to take up the time of the store's sales staff.
For those who don't want to give out any credit or personal information over the Web, or who are turned off by high shipping prices, a Web site can provide an avenue through which these shoppers can research a purchase. Armed with that information, these customers, too, can then complete the purchase through a traditional channel.
A multichannel strategy also helps companies build stronger relationships with customers. A company can cross-promote its merchandise so customers shopping in one channel are aware of benefits available through other channels. Furthermore, at each point of contact, retailers can collect information to get a better picture of customers' buying behavior.
A number of big retailers are already implementing multichannel strategies. Circuit City allows customers to research and order products on its Web site and then pick up those items at one of the chain's stores--a strategy that lets customers get their purchases faster and also save shipping costs. By the same token, Circuit City and Wal-Mart allow customers to return merchandise purchased online at a physical store.
REI is another example of a retailer that has adopted a successful multichannel approach. Internet kiosks are installed in all its stores and the REI URL is visible on about 50 different pieces of in-store marketing. REI's print catalog points consumers to the Web site, while the Web site points customers back to local stores for workshops and product demonstrations. According to GartnerG2, REI's multichannel strategy has paid off in millions of dollars of additional revenue. Online visitors to REI.com spent an average of 22 percent more in REI stores than offline-only customers and 45 percent of its online customers are multichannel shoppers.
Retailers that fail to manage operations across channels will be left behind. They won't sell as much. They won't attract the best, most lucrative customers. They won't achieve the highest levels of awareness or customer satisfaction. In the end, they really will be left in a parallel universe--one that's increasingly removed from the mainstream of commercial success.
Do you believe in multichannel retail? What have you learned by integrating your company's e-commerce operations with traditional channels? E-mail Adrian or Talk Back below.
