Retailers like Best Buy and Tower Records share challenges, successes in integrating offline and online channels.
At this month's 10th annual eTail Palm Springs, the multi-channel retail conference, leading innovators from various sectors of retail described how to drive increased profitability through innovative multi-channel retail strategies through increased ROI, customer loyalty and brand promotion.
The underlying challenge that emerged is that cross-channel consumers may be far more valuable to retailers -- however, their behaviors are more difficult to predict.
Attendees discussed very few unheard of or revolutionary concepts, but did walk away with a realistic perspective on the industry’s progress, and the uphill battle still left to climb. It was obvious, from both the lectures and the background conversations that those executives charged with scaling online sales continue to feel pressure to earn respect within their organizations. Because the Internet is a disruptive technology, mastering consistency across all touchpoints is difficult, if not impossible, and more so than marketers are realizing.
World-class multi-channel retailers, pure-plays and manufacturers exchanged ideas while speakers shared the strategies behind their executions, showcased their sharpened communications and discussed why their ROI drivers are so dynamic.
Going Beyond Customer Satisfaction Measurement
Larry Freed, CEO of ForeSee Results, reported on the state of customer satisfaction with ecommerce. With ForeSee’s studies predicting 35 percent near-term growth in e-commerce and only 5 percent growth for retail in particular, Freed explained that the online retailing sector is in a challenging and dynamic stage of maturity. “We are now entering the customer-centric stage where the number one challenge for retailers is to stay customer focused, which drives not only retention but also acquisition,” he said.
The latest American Customer Satisfaction Index (ACSI) report on e-commerce shows that consumers are more satisfied with retailers than with travel and service providers. “The ACSI scores have a track record of predicting future behaviors -- good shopping experiences create repeat business and measurable word of mouth -- so we can expect the upward spending trajectory to continue," Freed said.
But measuring the strength of customer satisfaction is not the end result. Retailers must understand the greatest drivers of satisfaction: search, functionality, navigation, look and feel, cost and security.
Sadly, a Forrester Research study found that only 33 percent of companies felt they were effective at influencing customer satisfaction. While most companies use behavioral metrics to reflect the past, they are not as good a predictor of the future. Satisfaction, Freed offered, is the best forward-looking metric.
To further complicate satisfaction levels, consumers are growing more demanding despite retailers’ improving product and service quality scores. Convenience and consistency across channels still have considerable room for improvement. Freed suggested that today’s metrics do not support multiple channel retailing, especially as the channels are converging. It is not relevant to measure the online channel with one ruler and offline with another. The challenge for this decade is to define the multi-channel linkages and learn from them.
Pure-play Retailer Maintains Bold Predictions
Drugstore.com’s CEO, Kal Raman, spoke fervently about the future of online retailing by examining the key factors currently driving the industry. He cited two major trends that will bode well in the next three years for the retail sector: the growing percentage of women shopping online, and the increase in expendable incomes of baby boomers.
Raman also predicted that personalization will play a larger role in the future. Direct-to-consumer businesses are in a unique position to utilize personalization to change the way the online channel is viewed. For example, eBay helps customers get to their products of interest faster by personalizing its interface.
Raman also alluded to competitive forces, but, unlike other speakers, cautioned that an executive who compares his company’s efforts to what his competitors are doing is employing a short-term strategy that will lead to lost opportunity. Instead, Raman challenged marketers to take a more holistic view of what the entire online industry is doing and incorporate best practices. Only then will a company stay at the forefront of customer needs.
Infusing a Brand into the Customer Experience
Integrating the online customer experience with the overall brand experience is no easy task. Kevin Ertell, SVP direct to consumer of Tower Records, knows this from experience. Tower Records has struggled to define its place in the multi-channel mess, and learned the hard way that the customer ultimately matters most. Only recently has the company begun to look at the business from a customer’s perspective.
Relying for so long on the company’s selection of product, Tower’s senior team was confused about how to translate the brand experience online. A power struggle existed between the retail stores and the Internet group, which store managers viewed as the enemy. Soon consumers took note of this poor relationship. Ertell noticed a dire need to repair consumers’ perceptions so they would regard Tower stores and the Tower site as one cohesive brand.
His first initiative involved allowing the stores to control their own store Web pages, which would augment store inventory. The second required the company to be more proactive: Offering sound samples online added value to the customer experience and launching an aggressive email campaign helped drive people to unique store events. Next, the Internet team developed research abilities for both those customers who wished to browse online but purchase at the retail stores and those who found interests inside the store but wanted to purchase online.
Lastly, by far Tower’s most successful program has been the creation of an expert panel of employees that are knowledgeable in a certain music category and offer recommendations online. These employee profiles were so popular that stores across the nation started printing out these pages and posting them on the store walls. The initiatives have paid off: sales have doubled since their launch and retail analysts continue to point to Tower’s potential. Ertell plans to constantly seek to find ways for the online channel to compliment the bricks-and-mortar experience, not replace it.
Specialty Retail Transforms into a Top Ten Destination
BestBuy.com’s SVP and GM, John Thompson, was refreshingly honest about his company’s challenges and accomplishments. He admitted his team has not fully mastered consistency across all channels, blaming it partly on the demands consumers make for the channel to be easier to drive and to control it themselves. Thompson said that giving consumers control is just an ebusiness cost of entry -- retailers have no choice. This power shift between consumers and retailers is intensifying, but he said BestBuy has won the respect of its core audience of techies and entertainment enthusiasts.
What has made BestBuy.com a top ten online shopping destination? The company’s mantra -- "test, verify, change" -- ensures that even this behemoth of a retailer stays nimble and responsive to industry dynamics. For instance, two years ago the marketing team launched an initiative called "Webolutionary" that made selling on the Internet a larger priority. Then, in 2003, the company released "BestBuy.com 3.0," which was an attempt to show consumers that the site was not just an online store.
Today almost 50 percent of store shoppers visit BestBuy.com before entering a store. Free shipping and brand recognition from mainstream America are driving the company’s online sales. If that weren’t enough, Thompson boasted that BestBuy.com’s loyalty program has already beat internal expectations.
These real life case studies are proof that consumers don't think in terms of one channel versus another. They think in terms of satisfying their needs. With this knowledge in mind, companies that can learn to take their brands to consumers versus making consumers come to them (via just one Web site) will see dramatic growth in their topline.
Rebecca Weeks currently directs Strategic Marketing at Citrus, an interactive brand response agency in Los Angeles. She is known for her exceptional industry analysis and trend-spotting skills.