Swimming Across the Retail Multichannel
Don Capman
J.D. Associates
April 2010
www.jdapos.com
After one of the deepest and longest recessions in history, many retailers are looking for new strategies to help them thrive in the “new economy.” Strict and well-balanced inventory control, better vendor management, and exceptional customer service certainly deserve careful attention. But how about examining the way we sell our merchandise? Rather than looking at costly physical expansion of brick and mortar stores, many retailers are seriously considering other supplementary ways to market their merchandise to a wider cross-section of customers. The most obvious way to reach the greatest number of potential customers is through an Internet E-store. But there are other ways to market your merchandise to the public as well: Some retailers send out catalogs periodically; others send out e-mail blasts; while others run infomercials and maintain call centers where customers can place orders by telephone and speak to real people; some manufacturers sell their merchandise through third-party outlets. All of these strategies are widely used and can be very effective and profitable if managed thoughtfully and seriously. When a merchant chooses to use more than one method to market their merchandise, they become a multichannel retailer.
Although e-commerce is a relatively recent method of selling merchandise, multichannel retailers have been around for many years. Sears Roebuck and Company published their first mail order catalog in 1888 and in 1894 the catalog had over 322 pages (many of which were used as toilet paper in out- houses!). Because much of the country was rural at that time and the only place for people to purchase their merchandise was in local but expensive general stores, Sears was able to seize upon an opportunity: they mass marketed the same goods less expensively to potential customers who were not able to reach their brick and mortar stores. Sears subsequently became the world’s largest multichannel retailer years before the term “multichannel” had even been coined.
Today, almost all merchants have a multichannel strategy or at least are seriously thinking about one. Multichannel initiatives vary from retailer to retailer with some choosing one additional channel while others may choose three or four. A good rule of thumb is to bite off only as much as you can chew. While multichannels can and should complement each other, one unsuccessful channel can have adverse effects on the rest of the channels including the original brick and mortar store. The other consideration to keep in mind when choosing to pursue additional channels is to hire an expert advisor. Each channel has different ways of enhancing the customer experience and choosing inexperience can and will prove to be a very costly mistake across all your channels.
BRICK & MORTAR
Although some merchants like QVC and HSN may never open brick and mortar locations, by and large, brick and mortar has been the primary method by which most retailers market their goods to the public. There can be many advantages as well as pitfalls to consider when opening a brick and mortar location. The following are just a few of the primary considerations that should be taken into account when opening a physical store.
• Location is a primary concern for any brick and mortar store. The store must be easily accessible and the demographics should demonstrate sufficient demand for the merchandise. For example, you might not want to open a teen apparel store in the middle of a retirement community. Then again……?
• Is there an adequate and competent workforce in the surrounding geography to ensure exceptional customer service? When customers require assistance, they are usually looking for well informed, friendly people. Hiring friendly and intelligent sales people is only half of the equation; training them properly is the other half. Attracting and retaining talent means creating and maintaining a positive work environment as well as providing very competitive reimbursement. Generally speaking, personnel turnover in retail is exceptionally high and costly.
• Is the store attractively merchandised? Because brick and mortar locations ask more of the customer than any other channel in terms of travel expense and time, customers need to want to make the extra effort. If a store is disorganized, unkempt and generally a difficult and unpleasant place to shop, most customers will choose to shop elsewhere or will shop online or through a catalog.
• Does the store frequently freshen its merchandise? It doesn’t take long for customers to get bored with stale merchandise. Don’t be afraid to get rid of SKUs that aren’t moving and free up some cash for new merchandise. New merchandise generates curiosity and excitement resulting in more frequent visits. If new merchandise isn’t readily available, moving merchandise around in the store will often generate the same excitement.
• Is the store adequately capitalized? Brick and mortar stores require considerable expense. Unlike other multichannel initiatives, a physical location usually involves a long-term commitment. Leases need to be negotiated and signed, build-out can be costly, store fixtures are not inexpensive and merchandise needs to be paid for usually before it’s sold.
All of the considerations of brick and mortar cause many retailers to look into multichannel alternatives when looking to expand. Retailers who consider multichannel expansion generally want to increase their revenue and their visibility while controlling many of the expenses associated with brick and mortar expansion.
Next month, we’ll look at Multichannel expansion. What does the term mean and what does it take to be a successful multichannel retailer?
MULTICHANNEL EXPANSION
Currently there are several major avenues available for retailers to expand into a multichannel approach to marketing their merchandise. To succeed, each channel needs to be carefully managed and have its own unique business plan while maintaining the branded identity of the entire retail entity. The following are some of the most popular multichannel initiatives.
1. CATALOG SALES
• Who are the targeted recipients? Production, print and postage are very expensive. Carefully researched mailing lists are also expensive but can be well worth the money. Determining who you want to reach is one of the greatest challenges when developing a catalog campaign. The list could originate from a list of current customers or from demographic information obtained through third-party research. Whatever the method of selection, mistakes can be costly.
• Is the catalog attractive and easy to use? Much like a retail store, a catalog must be visually pleasing. It must appeal to the potential customer and be easy to navigate or like the old Sears catalog, it will end up being used as toilet paper.
• Is it easy to place an order? Most successful catalogs give the customer several different ways to place an order. Customers can go to a website, call a toll free number or send an order form by mail or fax to the store or distribution center. Whatever the choice, all methods need to be seamless and easy or the customer will abandon the sale.
• Are return polices clearly stated? Return policies are often missing or confusing at best. As in a brick and mortar store, it is equally important to clearly state return policies. Some catalogs give the customer choices. They can send the item back by mail or UPS, or they can return the item to a brick and mortar location. Allowing returns to a brick and mortar location often results in increased sales and not simply refunds or even exchanges.
• How often will a new catalog be published? Since catalogs are very expensive methods of reaching potential customers, it is critical to time releases where the best return on investment can be realized. This strategy can differ from business to business. For example, mailboxes are full with a variety of catalogs in the fourth quarter of the year in an attempt to capture the holiday buyer. On the other hand, gardening and seed catalogs don’t get delivered until the first quarter of the year.
• Each new catalog needs fresh merchandise. Like a brick and mortar location, each new catalog should create the desire to explore. A real benefit of a catalog is that it has a “shelf life” and can sit in a bookcase until the new catalog arrives. Keeping a catalog fresh is relatively easy with fashion because merchandise changes from season to season. It becomes more difficult with gift or gardening, but it is no less essential.
2. INFOMERCIALS AND CALL CENTERS
• Who are you trying to reach? Mass media can be extremely expensive and non-discriminating in its reach. You need to decide whether or not your product(s) require an extra wide paint brush. Mass media reaches far more people who are not buyers than it does the small percentage of those who will buy. Carefully monitoring the return on investment is critical and timely.
• When will your infomercials be aired? Public Service Announcements (PSAs) are aired free of charge. Most people never see Public Service Announcements since they are broadcast when no one is watching or listening. Unfortunately most PSAs have associated production costs and, since very few people are seeing them, the return on investment is very low. Retailers pay big money for 30 minutes of air time. Instead of selecting the broadcast schedule by choosing the least expensive times on the rate card, the broadcast must be aired at optimal times to attract the largest number of potential buyers.
• Is the production professional and convincing? Most infomercials last no longer than 30 minutes. The message and the messenger must be compelling within the first couple of minutes or the potential customer will abandon the broadcast.
• Is the product easy to buy? Is there an incentive to buy now rather than wait? A time-limited offer with bonus merchandise can be very effective. Repeating a toll free number throughout the infomercial and clearly stating the acceptable methods of payment are critical. Call centers need to be fully prepared to promptly answer each call and enter the order efficiently.
3. E-COMMERCE
• Is your e-store easy to find on the web? Have you hired a professional Search Engine Optimization (SEO) company to help potential customers locate your e-store? If you rarely come up on one of the major search engines, your efforts will go unrewarded. SEO is not a onetime effort but is a living, breathing organism that requires regular nurturing and attention.
• Is your e-store attractive to the eye and easy to navigate? There are Internet tools which allow you to track visitors and click through rates. It is critically important to know how much traffic you are getting and how deep that traffic is travelling into the e-store. By tracking this, you can easily analyze the information and find out where the point of abandonment is and try to remedy the problem.
• Is your merchandise fresh? Like any other channel, to win repeat business, your merchandise needs to be new and exciting. Potential customers are quick to abandon e-stores that do not freshen merchandise, do not have Internet-only specials, and carry out-of-date news. Again, through the use of Internet tools, it is easy to track conversion rates (how many potential customers visiting the site who are converted to a paying customers).
• How easy or difficult is it to make a purchase? It may surprise you to know that many potential sales are lost at checkout. Getting lost in the process can be so frustrating to the buyer that they simply abandon the purchase. This abandonment is also easy to track and remedy with proper Internet e-commerce tools. Shopping online should be an easy and enjoyable experience. Check-out should be quick, understandable and seamless.
• Are return policies clearly stated? As in all other methods of multichannel retail, return policies need to be clearly posted. Whether the policies are liberal or conservative, clarity is an absolute must to avoid confusion or unwelcomed and fraudulent manipulation.
Most retailers in today’s new economy are currently taking advantage of multichannel opportunities. Because of limited discretionary income, today’s consumer is demanding value and convenience more than ever before. Customer loyalty is fickle at best. High visibility is essential for all retail enterprises. To achieve this visibility to the widest number of potential buyers, some retailers are selling their merchandise through several different channels at the same time while most are focusing on one channel which is most often e-commerce. As is the case with brick and mortar, multichannel initiatives are seeing varying levels of success. For those who take the “build it and they will come” laissez faire approach, success will be fleeting at best. For those who treat their multichannel initiative as a “real” business, requiring all of the attention of a brick and mortar store, the chances of success are much greater.
The initiatives discussed in this article are not the only multichannel opportunities but reflect the most popular ways that today’s retailers are marketing their merchandise. There are also new and exciting initiatives on the horizon utilizing mobile technology. Whatever initiative(s) retailers decide to choose when swimming across the multichannel, careful planning, consistent branding, value and extraordinary customer service are all essential ingredients to achieve a rewarding and profitable venture.