databasics; Mystery Shoppers - Todd & Holland Tea Merchants

American Demographics, Dec, 2000

As retailers branch out online, management of customer data across channels may determine whether the registers keep ringing.

Each winter, Todd & Holland Tea Merchants employs temporary salespeople for the busy holiday season in their River Forest, Illinois store. These new hires have little insight into customers' tastes, preferences, and previous purchases, making it difficult for them to make informed or effective sales suggestions. But that's changing this year, thanks to a new analytic system from SPSS Inc. called CustomerCentric.

Now when tea connoisseurs' credit cards are run through the system, their past purchases from Todd & Holland's store, Web site, and catalog will be analyzed, and a sales suggestion will appear on the register screen. Thus even the most inexperienced salesperson can point out the charming new English ceramic teapot to customers whose past purchases have shown them to be good prospects for such an item.

Stores large and small are making the move onto the Web, transforming themselves into multichannel retailers. But along with the opportunities these disparate channels offer comes the challenge of integrating data in order to create a holistic view of the customer. Only by combining data from the brick-and-mortar stores, Web sites, and catalogs can a system such as CustomerCentric help marketers have a true understanding of a customer's tastes and preferences in order to make an accurate and profitable sales suggestion. And only by integrating data will multichannel retailers be able to create a consistent shopping experience and provide a higher level of service for their customers.

When given the opportunity, consumers will use all the available shopping outlets presented to them. In a September study of major multichannel retailers, the National Retail Federation found that 68 percent of any particular company's catalog shoppers have also shopped at the company's stores. Among a retailer's online shoppers, 59 percent have also made purchases in the store, and 43 percent from its catalogs. "The pure-play model is over," says Sheryl Kingstone of the Yankee Group.

These switch-hitting shoppers are highly valuable to retailers. Jupiter Research estimates that these multichannel shoppers spend about one-third more than their single-channel counterparts. What's more, each channel can drive sales to another. Forrester Research calculates that e-commerce channels will influence $300 billion in offline purchases by 2005, as consumers research on the Web, and then buy in stores or from catalogs. Recreational Equipment Inc., for example, found that existing customers who shopped REI online for the first time increased their in-store spending by 22 percent over a six-month period.

Retailers are moving steadily to meet the consumer demand for online and offline channels. A September survey of the 164 largest retailers in the United States, conducted by the LakeWest Group, found that nearly 50 percent operated e-commerce sites.

Not only are traditional retailers making the move onto the Web, online retailers are expanding their offline presence. Gateway, for example, operates 349 stores throughout the United States, and sites such as Garden.com, Tivolo.com, Cooking.com, and Lucy.com have all started sending out catalogs. "They want to remind customers of their existence and inspire them to log on," says Seema Williams, a senior analyst at Forrester.

But among the growing number of multichannel retailers, there are many that have not effectively integrated their data-collection efforts across channels. Rather than a single source of information from which to make decisions and understand customers, separate databases have been created from the various channels. Jupiter estimates that 76 percent of multichannel retailers cannot track customer data across channels. "What we have now are data silos from Web sites, stores, and call centers, which are not connected to each other," says Debashish Sinha, a senior analyst at GartnerGroup. "This makes it impossible for a retailer to present a uniform, well-informed customer experience across channels."

Just ask David Joseph, a retail industry strategist at software provider SAS Institute. Joseph recently ordered an expensive new computer from an online retailer. After receiving an e-mail confirming his order, which indicated a delivery date much later than he expected, he phoned a customer service center but the representative could not pull up the e-mail. "I call this anti-customer relationship management," says Joseph.

Such breakdowns in customer relationship efforts can be deadly for a retailer. Many products have been turned into commodities, so service is what many retailers are actually selling to consumers. "The battle for the customer is no longer won by the retailer's products, but rather, the manner in which they provide those products to the customer," says Andrew McGlasson, senior marketing manager at Retek, a leading software provider to the retail industry. The armament in that battle is customer data, and building customer relationships with comprehensive and integrated data can be the strategic differentiation between competing retailers.