Multichannel e-commerce

Last week Inside Retailing published this interesting think piece by Stuart Bennie titled: Multichannel 'may not win online war'. I thought it deserved a response that wouldn't fit in the comments section, so here we are on our web-soapbox ;) where I get to rebut and expound on the points he raises. I will include relevant portions of the original article right here, so it'll be easier to read without jumping between tabs/windows:

The article sets the stage using the recent kerfuffle we have witnessed regarding retailers pushing back on their online cousins. From "Multichannel may not ...":

Now some 15 years later there is virtual hysteria about online sales and how these are affecting retail bricks and mortar sales in Australia. This hysteria started in earnest about six months ago with the attack on the non collection of GST on off shore orders under AU$1000 and although this has now died down, as retail sales decline the attacks on online as a threat are intensifying.

This phenomena seems to be largely Australia-centric. ... Some pundits are attempting to find solutions. The term “multi channel” is being bandied about as part of the solution. 

Then a surprising perspective is put forward:

  1. Firstly don’t go multi channel. Rather create your own competition.
  2. Secondly, if it is possible, try tagging on slightly different styles compared to those being bought for the bricks and mortar stores... direct comparison is not possible.
  3. Thirdly, get innovative with online promotions and online marketing.
  4. Lastly, don’t be ashamed of selling at lower prices online.

Spinoffs, of brands/companies are complex and known to be very difficult to do successfully. Which is why, while establishing an online competitor to your existing retail brand might be a short-term win, I don't believe is a sustainable approach for smart businesses.

The article correctly frames the benefits of selling as (1) price and (2) service. But the previous 4 recommendations mostly rely on price, which marketing fundamentals have shown to be a shaky foundation on which to differentiate yourself and build a strategy on.

Let's explore what multi-channel really means, and why doing it right means tapping into the service benefits it provides:

Free shipping is a service, not price differentiator

Zappos, the poster-child for pure-play online retail done right, gets repeated mentions in case studies and conferences for it's innovative approach to customer service (e.g. "Deliver wow through service"), and their free shipping feature is an aspect of that.

While AusPost rates mean that you may not be able to support similar free shipping offerings, think laterally. Maybe consider free in-store pickups, which gets the customer in the door and give you an opportunity to sell/impress them some more.

Reward customer loyalty regardless of whether they shop in-store or online

By extending your brand online (instead of fragmenting it, as suggested in the article), you can recognise repeat business and recognise/reward customers accordingly. This is exemplified by Staples, the largest office supplies Stateside retailer, catering to consumers and SMEs. Staples rewards customers regardless of where they shop, online or in-store, once they spend a minimum dollar value ($10): 

Redeem your Rewards any way you'd like - online at staples.com, over the phone at 1-800-333-3330 or in any Staples® store

This is preferable to the fragmented-brand, sell-for-cheaper-online approach posited in the article:

  • By going online with your existing brand, you're strengthening it; not diluting or fragmenting it.
  • Where will lowering your online prices stop? Customers will have no loyalty to buying from your online store, you will lose the sale for a measly $0.01 if that ultra-price-sensitive audience is whom you're targeting.
  • Repeat business is a key pillar to sales growth; integrated multi-channel retailing will help you recognise and reward returning customers. Save their order histories, streamline their shopping experience by bubbling up personalised recommendations based on previous purchases.

Convergence of in-store and online, with the uptake in location-based smartphone services

We're experiencing a proliferation of location-based smartphone applications which means you have the opportunity to deepen your understanding of customer behaviours. If customers are 'checking in' to your locations, you know which stores they are more likely to frequent, which means you can send them highly-targeted information such as sales specific to certain store locations.

Innovative and online marketing

The article only touches on online marketing, but to truly leverage this opportunity you need have integrated multi-channel sales in place. By observing customers' behaviours across all your channels, you will be positioned to deliver highly-targeted marketing upping the likelihood of converting your communications into sales. Build your customer profiles with both in-store and online initiatives. Clothing retailer Gap which just entered the Australian market, has been collecting email address at store points-of-sale since the late 1990s:

Promotions for Gap web sites, both online and off, were geared to drive customer registrations and to collect e-mail addresses and often offered discounts and contests as incentives. Cash registers at Gap and Banana Republic promoted the online store, and periodically ran promotions that allowed customers the opportunity to register by filling out a form at the store or through Web kiosks, where available. Gap used this contact information to send customized emails to registered users promoting new arrivals, specials, and other promotional events, as well as offering a birthday and gift reminder service. The email promotions proved successful, and drove a significant percentage of online sales.

Full case study at http://gsbapps.stanford.edu/cases/documents/EC9A.pdf

Multi-channel, omni-channel or cross-channel selling: it's about service

Which in turn is all about your customers, get that right and you're on your way to retail success! From http://www.internetretailer.com/2011/06/30/operations:

The payoff of effective cross-channel operations comes in gaining an edge in the market, as consumers respond to retailers who provide better service whether through one or several retailing channels. "This absolutely brings a significant business advantage to retailers from a customer growth standpoint," Anand says. "The minute a customer realizes a retailer is consistent across all channels, she realizes the retailer cares about her no matter what channel she shops in. And that's a win for the retailer."

Your thoughts? Do these examples demonstrating considered and carefully executed cross-channel retailing convince you. What opportunities are you eyeing, and conversely what are your concerns?