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Compete Blog: Cross-Channel Retail - What are online customers doing today?

August 10, 2009

By Matt Frattaroli

Through a special arrangement, presented here for discussion is an excerpt of a current article from the Compete Blog. Compete Inc. is a web analytics company that focuses on understanding how consumers use the internet.

Aside from survey results, few hard facts have been published about cross-channel retail. Possibly this is because it's hard to gather data and measure it to make an apples to apples comparison. Even the definition is not immediately obvious.

Some often think of cross-channel as being synonymous with the term "multi-channel" but it is far more involved than simply having multiple channels. The idea behind cross-channel retail is that a consumer should have a consistent experience with a retailer across all channels made available by the retailer. That means having the same marketing message, pricing, and customer service everywhere - in store, print, mobile, email, online, catalog or call center.

Sounds complicated? Expensive? Hard to quantify? Yes, yes and yes. But is anyone succeeding?

I started my quest by looking at a few of the top brick and mortar retailers to understand what this group was doing from an online commerce perspective:

After marveling at J.C. Penney's industry leading conversion rate, I then looked at the sites and their functionality specifically related to anything that would drive cross channel behavior. After a few passes through the shopping funnel I found some significant differences. Best Buy and Sears lead the pack with buy online, pick-up in store options with an order typically available in store within an hour. Walmart has been pushing "Site-to-Store," which provides free shipping to a store or a fee based membership program with faster shipping than the standard option. J.C. Penney is fourth with a ship to store option that saves you a whopping $3-$4 on average compared to shipping to your home (does that even cover the gas?) as well as a limited store inventory look up. And then there's Target; no functionality that drives customers to the store but at least they have some free shipping options. Nice for conversion, but nothing that impacts cross-channel behavior.

So then the big question remaining is how are the significant cross-channel retail initiatives performing at Best Buy, Sears and Walmart? Do customers care? Do they use it? I then looked at all online orders in June to see what's going on from a consumer perspective.

For these three leading retailers, this translates to a lot more foot traffic in-store and likely a lower cart abandoned rate. While I'm not quantifying ROI here, it seems to me that from what customers are actually doing with cross-channel retail (from the buy online, pick-up in store perspective), it is very much in demand and gives customers a service they obviously want and use today.

Discussion Questions: Are retailers achieving a significant boost from buy online, pick-up in stores options? How important is true cross-channel shopping for retailers? How can merchants best optimize cross-channel integration on websites?


Discussion Questions:

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Instant Poll:

Are retailers underestimating or overestimating the potential gains from offering a buy online, pick-up in-store option?


Done well, cross-channel is probably the wave of the future. Of course, that's the problem. What does "done well" really look like? It seems that if you're seen by consumers as leading the pack in terms of variety, price, etc, you may have one leg up in the cross channel game.

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Ryan Mathews, Founder, ceo, Black Monk Consulting

Consumers want a seamless online to in-store experience. They expect that items found on retailer's website will be available for the same price in-store. Why should they expect any less? And why should a retailer offer any less?

Whether a consumer does research online and then buys at retail or buys online and picks up at retail, the experience must be seamless.

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Max Goldberg, President, Max Goldberg & Associates

I agree cross-channel is important. But I still believe that it's not necessary to be everything to everyone. There are some very successful sites that specialize and do quite well. If I'm looking for a kayak I'm not going to Best Buy; If I want car or motorcycle accessories, I'm not going to JCPenney. You get what I mean, I'm just saying there are limits to cross channel.

Len Lewis, President, Lewis Communications, Inc.

I went through the effort of trying to quantify the boost from cross-channel processes--I looked at both "save the sale" in the store, as well as buy online/pick-up in store and cross-channel forecasting and purchasing. The results of the analysis are here.

We found nearly a 5% improvement in sales in the first full year of implementation, and this was based on very conservative calculations. In fact, when I was previewing the results to retailers to validate our assumptions and calculations, I got the most intriguing feedback ever: a lot of assurances that I was on the right track, followed by big winks and "You're way under-estimating the impact." The part that the model "way under-estimates"? The value of driving incremental trips to the store, and how much additional $ that people spend on those incremental trips.

Cross-channel is very much a case of 1+1=3.

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Nikki Baird, Managing Partner, RSR Research

Consumers want multi-channel services when they want them, but not necessarily all the time. Figuring which consumers want which services at what time is a challenge. Figuring what kind of services or offers create a good ROI is also a challenge. I expect that much more experimentation, observation, and measurement is necessary.

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Camille P. Schuster, Ph.D., President, Global Collaborations, Inc.

The greatest difficulty seems to be providing the same customer feel in these different modes. Shopping Staples online and in-store is like shopping at two different companies.

At this time, I question how much is plus sales, versus a reduction in sales that would go to other retailers. Clearly, pure play internet sales have taking away from brick & mortar. The store delivery option is not promoted up to its potential. What better way to get the consumer into the store where they might buy some other merchandise?

Also, it's far cheaper to carry an expanded product line in the distribution center than in the store. We used to call this special order. What better way to keep the consumer in the fold?

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W. Frank Dell II, CMC, President, Dellmart & Company

Very good comments all. I have to confess I am surprised the power and the potential of cross-channel has not been realized and implemented more quickly. But it will happen, and it will be big. As a noted futurist has said, we routinely overestimate short-term change and underestimate long-term change. But "never mistake a clear view for a short distance."

Roger Selbert, Ph.D., Editor & Publisher, Integrated Retailing

As futurist Clay Shirky often says, technological innovations only become truly powerful when we stop talking about them. They become common and customary elements of how society interacts. According to our research, this day is fast approaching for cross-channel integration.

It comes down (as a lot of things do) to demographics. Boomers will increasingly choose to drive less and less. Box stores will become more and more difficult to navigate. Trios to power centers will become more limited. Buy online--pick up at store and home delivery will become increasingly more commonplace to the point that we no longer distinguish between the shopping methods.

Doug Stephens, President, Retail Prophet

The answer to the question "What are online customers doing today?" is easy. They're doing the same thing they've always done; they're balancing their busy lives by leveraging technology.

A brand is a brand. Consumers expect the same expedient professional service and products regardless of where they're shopping you.

Rather than "multi-channel" think "one-customer."

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Christopher P. Ramey, President, Affluent Insights

Cross-channel? Yes, all channels are best practices of the future. Wherever your customer is, is were you need to meet and exceed their expectations. As seen by the chat (above) Wal-Mart has a market cap of 191B, so the rest of the retail world clearly has an opportunity to develop the tools needed to capture the customer. Lastly, remember the 80-20 rule: 80% of your revenue will come from the top 20% of your customers. Focus on building and keeping that segment consistently is mission critical.

Brian Anderson, President, BA Search Group

So far, the comments have only lightly touched upon the notion of a "single view of the customer." Retailers over the past few years have identified their inability to obtain a "single view of customer" as a major inhibitor to operationalizing their customer-centricity strategy. In order to deliver on their brand promise and realize their vision of precise marketing and personalized service, the innovative retailers are now partnering with technology firms to help them develop and obtain a holistic view of their customer information.

Right now, there is poor integration across business channels, resulting in poor customer service. The objective for retailers is to create a single view of their retail customers across all their channels, enterprise wide. What is required is the capability within the IT Infrastructure to feed all consuming applications and the data warehouse with a complete and accurate picture of the customer.

The Key IT/Infrastructure Changes required for this are:
> Implement a centralized customer data model across all divisions and multiple lines of business by converting multiple customer data sources into one customer data hub
> Create customer definitions and hierarchies
> Develop a common robust technical architecture, database and application toolset

The Benefits and/or Expected Value that can arise are:
> Enables multi-channel customer service reps to resolve customer's issues
> Promotes cross-selling and focuses promotional opportunities delivered to customers on web site
> Creates a single source of customer order information and purchase preference supporting tri-channel reorder and enabling precision marketing
> Enables store associates to tailor customer service and extend offers at the cash register based on customer purchase history
> Provides single customer data source to support regulations protecting customer privacy and reduces legal exposure

Focus in these areas has proven to drive overall revenue and reduce customer attrition.

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Ralph Jacobson, Global Retail Industry Analytics Marketing Executive, IBM

As Ralph correctly mentioned, it's essential to create a single view of the customer. For example if a customer had abandoned his/her cart with a book, online, the next time the customer walks into the store, based on the customer segment, the customer could be reminded/ offered a promotion on the same book that was dropped in the abandoned cart.

A single view of the customer also enables the retailer to understand consumer behavior across channel. What is bought online and what is bought in the store and find opportunities to cross sell/up sell across the channel. A store pick up is a good opportunity to up sell/cross sell while the customer is already in the store to pick up what was bought online.

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Shilpa Rao, Practice Head - Merchandising, Tata Consultancy Services

The true goal of multi-channel marketing is to permit customers to interact with the business through the channel they prefer, not the channel that you direct them too. That is as true for pickup and delivery as it is with ordering, profile maintenance and customer service.

I suspect the reason that customers at Sears and Best Buy are picking up in-store is a mundane factor--the weight of the items that they are purchasing would make ship-to-home prohibitive from a cost standpoint. After all, shipping a 50 inch plasma TV to the home is no trivial task.

But the point still remains--the goal is to enhance the customer experience by putting the customer in control, from initial contact all the way through to the delivery. In-store pickup does have strategic benefits for the company, but that is almost beside the point. The more control you give customers on how they interact with you, the more likely they are to build a relationship and be retained, with all the financial benefits associated.

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Mark Price, Managing Partner, LiftPoint Consulting, Inc.

Another piece to this cross-channel experience is the return policy. Is there a seamless flow from purchase online, get it home, and ability to return in store without issues? I, personally, have found Target to do this very well.

Jennifer Keller, Research Director, C&R Research

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