Bricks and clicks slow to connect - E-Commerce - retailers using online services to sell product

DSN Retailing Today, May 20, 2002 by Molly Prior

By the start of 2001, bricks-and-clicks had emerged as the winning business model of online retailing. Traditional retailers, such as Target and Wal-Mart, had proven themselves to both customers and pure-player predecessors with an incredibly successful online holiday selling season. They, along with the survivors of the "dot-bomb" era, helped bring a renewed practically to the alternative sales channel, one rooted in old-fashioned business principles.

But multichannel retailers doing business online had little time to rest on their laurels. Customers had become fairly comfortable with the online buying process and, therefore, demanded a consistent experience in all channels--which posed great challenges for traditional retailers that were ill-equipped to deliver a full range of products. And in as little time as the channel took to gain popularity, bricks-and-mortar retailers went from telling themselves, "Hey, we can do this," to asking themselves, "Do we really want to do this?"

When the Internet economy began to implode, retailers responded by shifting their focus to tighter integration and seamless customer service. Those that had spun off their Internet divisions--such as Staples, Kmart and Wal-Mart--in the hopes of lucrative IPOs, slowly began to reel them back in under the corporate umbrella.

The real headaches of achieving integration and customer service involve streamlining different systems, technology and databases. A typical retailer could have anywhere from seven to 30 consumer databases, making it virtually impossible to recognize a customer across all channels, said Forrester Research retail analyst Carrie Johnson. Smaller tactical issues, such as how to effectively collect customers' e-mail addresses at the store, have yet to be resolved.

Scott Silverman, executive director of Shop.org, the online arm of the National Retail Federation, told the story of how one retailer attempted to solve the problem with a contest to see what store associate could gather the most e-mails at the point of sale. The woman who took first prize won by copying e-mail addresses from her husband's address book. The unsuspecting persons contacted by the retailer were outraged by the rash of unsolicited e-mail promotions.

One thing that retailers know for sure, said Silverman, is that the multichannel customer is their most loyal customer and primary to the success of their overall business. "Customers expect a 360-degree shopping experience," which makes being a part of the online channel "the cost of doing business," Silverman said.

The Multi-Channel Retail Report 2001 conducted by Shop.org, said store shoppers who also bought from the same retailer online spend an average of $600 more than typical store shoppers of that retailer. Shoppers who bought in all three channels, dubbed "super shoppers," now account for 34% of online shoppers.

Still, measuring the influence of the site on in-store purchases remains a huge issue for retailers, which is why the majority of retailers consistently name measuring ROI as one of their top concerns. "Last year taught retailers to test everything before making a major decision, or implementing change," said Johnson. Analytical tools from technology companies, such as Coremetrics and WebSideStory, help retailers measure metrics, such as site design and search tools, by telling the retailer if the customer who uses that tool spends more money, she added.

Catalog retailers accostomed to using data to run their businesses, are making the greatest strides in measuring ROI. Johnson said, for catalogs, where space is finite and, therefore, more valuable, profitability is measured by square inch. Coupons and promotions that lead consumers to a specific URL, and the in-store pickup option are a few ways to measure impact.

Shop.org research gleaned from interviews with more than 40 retail executives revealed even the more advanced players are still struggling to define, then measure the right metrics. These retailers, unhindered by organizational barriers, measure ROI of all three channels together, especially on a program-specific basis, such as cross-promotions. The report reveals novice players are still grabbling with internal issues, such as double counting customers.

The realities of online retailing are similar to those of their offline counterparts in terms of balancing innovation and growth with razor-thin margins. But the online world has its own dynamics to contend with, as well. Johnson reminded offline retailers that they don't have eBay gobbling up market share in every category, or Amazon pounding on their door. And unlike consolidation offline. e-commerce remains a very fragmented industry.

On the upside, the virtual Web and the technology associated with it may allow retailers to keep closer tabs on the merchandising practices of their competitors.

Companies, such as comScore, provide retailers with analytical data gathered from tracking consumer behavior across the Web through an opt-in relationship with users. ComScore can measure "slippage," money flowing through the site that was spent elsewhere on the Web. It gives visibility into browsers who visit their site, but leave to purchase elsewhere. The technology can tell the retailer what the consumer bought and where she found it on the site. The retailer can then improve their merchandising accordingly. "There are literally tens of millions, almost hundreds of millions of dollars flowing through these sites," said Erin Hunter, vp of industry solutions for comScore.