The Cross-Channel Flow

In the not-too-distant past, the buzz about e-retailing sent merchants scurrying to put up Web sites as a means of bolstering their sales and upping their Wall Street image. Today, an increasing number of retailers are discovering that such efforts are not sufficient. To maximize sales opportunities, they must tightly integrate all channels of business-- brick- and- mortar, online and, in some cases, catalog and telephone.
"E-commerce is at a tipping point," says Rob Garf, vice president of retail strategies at AMR Research. "Retailers are realizing that they can no longer run independent channels. They need to show one face and one brand to the consumer."
Merchants are recognizing that the widening breadth of purchasing channels that consumers can choose from has made cross-channel integration paramount to shopper loyalty and retention. "In the past, the retailer was king -- the consumer had to shop within the environment that the retailer set out," says Garf. "Today, the consumer is really controlling this because they have so many choices. While it was once difficult for consumers to find items in different stores and locations, they can now compare prices, do research and locate products on the Internet. They can do this in the comfort of their homes or via mobile devices while they are shopping. They expect a seamless experience when doing so."
Results of The State of Online Retailing 2007, a study of 150 retailers conducted for by Forrester Research, bear out Garf 's assertion. Survey respondents noted that 43 percent of their catalog customers also have purchased from their online stores; 35 percent of online customers have purchased from their brick-and-mortar stores. Online retailers also reported that in 2006, they dedicated (on average) 18 percent of their marketing spend to cross-channel sales, up from 13 percent in 2005.
"Retailers understand not only the value of operating across multiple channels, but of providing consumers with an equally rich, consistent experience, whether they are shopping online, in a store, through a catalog or any combination thereof," says Forrester Research senior analyst Sucharita Mulpuru.
"Cross-channel customers have been found to spend nearly 30 percent more on their purchases when in-store and Internet initiatives are closely integrated," says Mulpuru. "They are also more brand-loyal. If the experience is the same no matter what the channel, there exists little reason to shop anywhere else."
Multi-channel shoppers have grown so astute at discerning differences among channel offerings that ignoring their sensitivities can lead to significant sales losses. One retailer learned this the hard way. Hoping to drive consumers to its Web site, the merchant put together an in-store display offering customers a free toy with an online purchase. Instead of completing their transactions, many customers were seen leaving the checkout lines empty-handed. They returned home and made their intended purchase online.
For some retailers, featuring identical products and promotions in-store and on Web sites has become a key component of the cross-channel integration strategy. The Sharper Image is a good example. Customers logging onto its Web site see whatever item the merchant is emphasizing in the upper lefthand corner of the home page. In the center of the page, a rotating Flash presentation also features the product. The item also is featured at the front of the store, highlighted via special signage and a demonstration video. And, it is depicted in a spread that spans the first two interior pages of The Sharper Image's catalog.
Book retailing giant Borders Group also is trying to meld its shopping experiences via an online feature called "Borders Book Club." Clicking on the "Borders Book Club" icon enables users to view video clips of authors discussing their work. This portion of the site also includes a direct link to order the book being presented. "The 'Book Club' is a critical element of our ongoing cross-channel retailing strategy. By sharing as much information about our books online as we do in the stores, we're boosting the potential for sales," says Kevin Ertell, Borders' vice president of e-business.
Ertell says the retailer expects comparable results from its launch of a patent-pending Magic Shelf feature. The Magic Shelf will be part of an enhanced Web site slated to go live before the end of the first quarter of 2008. It is built on Allurent's Rich Commerce Suite software platform. Upon arriving at the new home page, customers will be able to see and browse through a realistic looking, three-dimensional wooden shelf of actual book, CD and DVD covers. Products are displayed as they would be in sections of stores devoted to new titles.
When they "hover" over a title, consumers learn about product details. They also access links to additional information and have the option to add the item to a shopping cart. Ertell likens Magic Shelf to virtual reality, noting that there will be no difference between utilizing it and browsing through merchandise in an actual store display. The fact that the bookshelf metaphor is "familiar and intuitive" to Borders' customers will heighten the feature's appeal. Already, he says consumer response to a beta test of Magic Shelf has been very positive.
Down the road, Borders plans to further personalize Magic Shelf and configure it to provide what Ertell deems an even greater store-like feel. For example, a "Picked for You" feature will populate and display a shelf of appropriate titles based on customer interest. Other improved search capabilities and enhanced navigation components will yield access to employee reviews of products carried on the Web site (similar to paper recommendations affixed to shelves instore), as well as the ability to deeply browse categories online and filter searches via criteria that include price and format.
Cross-channel integration also has come into play in the sporting goods segment. Edwin Watts Golf implemented an SLI Systems search engine through which consumers can search for stores that carry items that are out of stock or unavailable via its Web site. For example, the retailer does not carry shaft components on its Web site. But customers frequently visit the site expecting to find these items. At one time, visitors searching for components on the site received an "item not found" type message. Now, they are greeted by a banner, which refers them to stores where they can find particular models.


Retailers are beginning to recognize that frontend integration alone is not enough to maximize cross-channel opportunities. "The ability to provide multiple purchase points is critical to success in today's competitive landscape," says Garf. "But retailers must manage these channels in a cohesive manner to create a seamless experience among them."
This means utilizing a single, unified platform wherein fulfillment activities are visible across all lines of business. This avoids having customers order online only to learn that desired products have been allocated for or sold in a brick-and-mortar store. Such a platform also paves the way for "order online, pick up in-store" capabilities, as well as for in-store returns of merchandise purchased via Web sites.
Legacy system incompatability issues are preventing many merchants from jumping on this bandwagon. But analysts say that those that have taken the plunge are doing so because the benefits can outweigh the disadvantages. According to AMR, cross-channel order management solutions spark improvements in inventory on hand. They decrease out-of-stocks and increase conversion rates by 20 percent during the first year.
In-store consumer pick-ups can have a tremendous impact on incremental sales. Customers picking up online orders in a store (rather than waiting for them to be shipped) spend an additional $154 on additional items. "The assumption is customers will like this experience so much that they will become loyal again," says Paula Rosenblum, formerly of Retail Systems Alert Group, in a report entitled, "Cross- Channel Customer Centricity, Key to Retaining Loyalty."
The introduction of an "order online, pick up in store" option by REI a few years ago bears this out, asserts one vendor. On the first day this opportunity was made available to consumers, 60 out of the retailer's 66 stores received pick up orders from online customers. The service "exceeded all sales projections." One-third of the customers who use the service are said to spend an additional $90 once they pass through REI's doors.
Optimization of fulfillment locations and allocation creates another key advantage. With a cross-channel solution of this type in place, retailers can direct fulfillment to the most cost-effective locations, regardless of how orders originate. A single point for reporting on filled and unfilled demand means merchandise managers can improve future allocations. This creates a more efficient inventory planning model and prevents shortages and stockouts that diminish the caliber of customer service.
One retailer reports that access to POS and inventory information across the brick-andmortar, online and catalog channels is "significantly" enhancing its ability to better service its customers. Orders for individual SKUs can be processed in the same sequence they are placed, whether on the Web site, via the catalog, or through a special order placed in one of the stores. Conversely, it was once common for entire groups of orders from one channel to be fulfilled ahead of other groups of orders from another channel, sparking discord among customers.
Just as significantly, the availability of comprehensive, cross-channel inventory levels and pricing data means customers are no longer told a particular product is in stock or is being offered at a certain price when that is not the case. "Before, people taking catalog orders couldn't tell whether something had sold out on the Web site and vice versa," says Barrett. "There was also no way to see if we could locate a given SKU in a store for a catalog or Web customer."
The merchant also has a more comprehensive, unified view of its customers and their purchasing behaviors. Such information is used to increase the volume of merchandise purchased by customers. For example, by reviewing data pertaining to a particular consumer's previous purchases and the channel(s) through which those purchases were made, the retailer can target special promotions and/or decide whether sending a catalog to the individual would prove worthwhile RIS
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