Some Stick to Brick and Mortar

Discussion
May 03, 2006
George Anderson

By George Anderson


Despite the incredible growth of online sales, many well-known retail names have only limited e-commerce operations or none at all.


Some such as T.J. Maxx are no longer selling online because the company’s venture into that business delivered poor results. The Limited has never even tried selling its products online. Others, such as the Swedish furniture retailer IKEA, sell a limited selection of products online leaving many of the chain’s shoppers wanting for more.


Many believe that retailers not taking full advantage of the online channel are hurting their own business while, perhaps unintentionally, sending shoppers to competitors.


Larry Freed, chief executive of ForeSee Results, offered a blunt assessment to The Wall Street Journal. “Many retailers have dropped the ball,” he said. “A strong online presence is no longer a luxury for retailers. It’s a requirement.”


Steve Davis, senior vice president of partner services for GSI Commerce said that soft online sales are not conclusive evidence that e-tail initiatives are not working. Online stores, he maintains, have become the “most-important marketing channel” for many.


Research conducted by comScore Networks lends some support to what Messrs. Freed and Davis are saying. The research firm found that during last year’s fall shopping season, 25 percent of people who went online to research products wound up making a purchase at their computer. Sixty-three percent found what they wanted online and then went to a bricks and mortar location to make the actual purchase.


Some retailers, however, remain cautious about jumping online with both feet forward.


Limited Brands only recently began selling items from its Bath & Body Works chain online. Other of the company’s banners, including The Limited and Express, have information sites but do not allow consumers to make purchases.


“Our thought is that we really want to come through with a thoughtful strategy and not just rush onto the Web to say we’re there,” said Anthony Hebron, a Limited Brands spokesperson.


Mr. Hebron’s assertion does hold some weight considering the success the company has had online with another of its banners, Victoria’s Secret. The lingerie retailer generated $4.4 billion or about 28 percent of its total revenues last year through consumer direct channels including online and catalog sales. The retailer’s annual online fashion show has become one of the most widely viewed events on the internet.


Still, there are notable holdouts. Luxury retailers such as Prada and Cartier, as The Wall Street Journal report points out, use their web sites to promote product but not sell it.


Sucharita Mulpuru, an analyst with Forrester Research, believes many in the luxury retail segment are misguided in their approach to e-commerce. “There’s still a lot of 1998 mentality — a lot of leeriness around the Internet and what it will do to the brand,” she said.


Tiffany & Co., which does sell items online, doesn’t believe that all luxury items are best sold that way. Beth Canavan, executive vice president at Tiffany, said there are reasons the retailer doesn’t sell engagement rings over the internet.


“There’s a lot to know about a Tiffany diamond ring,” she said. “A purchase that meaningful deserves a more personal exchange.” 


Moderator’s Comment: Are some retailers better off sticking to brick and mortar sales alone or does today’s business environment require an e-commerce
component, as well?
– George Anderson – Moderator

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12 Comments on "Some Stick to Brick and Mortar"


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Len Lewis
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Len Lewis
14 years 9 months ago

I’ve never been a huge booster of online grocery shopping despite the success of some companies in doing so. I too believe that many retailers have dropped the ball — primarily for not putting the right products online.

It doesn’t make much sense to me — especially in times of rising fuel and delivery costs — to put a lot of basic groceries on the net. I think food retailers have to be more selective in what they put online to make that a unique experience, the same as many are trying to do with their stores — like Safeway’s Lifestyle units. You might want to look at Tesco in the UK and Aldi in Germany which are setting up sites specifically for nonfood items — something that can distinguish them from other retailers and expand their product offerings and customer base.

Bernie Slome
Guest
Bernie Slome
14 years 9 months ago

Retailers need to wake up and realize that this is the 21st century. Young and old use the Internet. Young and old have major dollars to spend. Young and old shop on the Internet. The Internet can be used to create and enhance a brand, but that should not be where it ends. Whereas a high-end luxury item such as a Tiffany engagement ring might be viewed as more exclusive by not being sold on the Internet, Tiffany still offers some products via the Internet. Not everyone is Tiffany. More than 25% of all retail purchases are made on the Internet. If you don’t have an exclusive item, then Mr./Ms. Retailer, you had better be selling on the Internet!

Karin Miller
Guest
Karin Miller
14 years 9 months ago

If floors me that, considering their merchandise, demographics, competition and presumed access to Victoria’s Secret customers through cross-marketing programs, the Limited and Express have not developed web sites – not even basic store locators.

I think IKEA has a lot of untapped potential in the US, and they could be better leveraging the internet and direct marketing to reach the still-large US population that does not have access to their stores. Their online selection seems more limited than it should be, though many of the cheap/heavy products they sell in their stores would double in price when shipping charges were added.

For a retailer such as Ross, not having an e-commerce site makes sense though. With the way they acquire and distribute merchandise, it would be hard to tell a coherent story and tie it in with what was happening at the stores. Also, low prices are the story, and shipping charges would negate the savings.

Eliott Olson
Guest
Eliott Olson
14 years 9 months ago

While the transaction might be done at a store or via the net, more actual sales and information gathering is being done via the net than net transactions would indicate. With hundreds of cable channels, declining newspaper readership and increasing postal costs, how does one communicate with the customer? As communication channels diversify as quickly as retail channels selling groceries, the internet will become an mission critical tool in every grocer’s box. The closest thing to the future can be seen on Ukrop’s web site.

Bernice Hurst
Guest
14 years 9 months ago
Cross marketing and giving consumers maximum opportunity to browse and shop depending on their mood, the occasion and proximity to stores would be key indicators to me of the importance of e-commerce. Measurements showing that the web doesn’t necessarily bring in more revenue have to be interpreted carefully. We have all mentioned the people who look online first even if they actually make their purchase in the store. From a Tiffany type perspective, if an engagement ring is so important to talk about face to face (and I wouldn’t disagree) then perhaps they should trust their customers to make that decision. From an IKEA perspective, they have few stores in the UK and no e-commerce facility; maybe selling things as cheaply as they do is prohibitive but many people might become customers if they could shop online. And finally, as they say, there is the whole distance issue. We don’t all live near every store AND as someone who regularly makes purchases for people living a long way away, the web makes my life much… Read more »
Bill Bittner
Guest
Bill Bittner
14 years 9 months ago
Anybody who has taken a look around at all the personal websites individuals have set up on MySpace understands that technology cannot be the thing that challenges potential internet retailing. You see some pretty sophisticated, interactive, and eye-catching examples of what one person can do (with a lot of flexible technology behind them). Logistics is another consideration and companies are wise to think through how they are going to fill customer and retail location orders. But the final choice is an individual strategy decision. This is what “makes markets.” Some retailers (most?) have decided the internet has to be part of their strategy. The question becomes how to properly access the two channels and blend the advantages of both. The internet is great for browsing and getting a great price. It is terrible for confirming fit and getting pampered. Internet products need to be shippable (forget the eggs) and, if they do not have a reasonable price point, must be bought in quantities sufficient to cover the shipping charges. So I think the simple answer… Read more »
Mark Lilien
Guest
14 years 9 months ago

There’s no federal or state law requiring a retailer to have a catalog, to sell door-to-door, to have a party plan, to use multi-level marketing, to be open 7 days a week, to accept credit cards, or even have a listed phone number. And there’s no law requiring e-commerce either. That’s good, because some retailers wouldn’t make money doing it, even if (1) it’s outsourced or (2) it entices greater bricks and mortar traffic or (3) it pleases securities analysts or (4) it increases sales. Every decent management has to make priorities for its business. Every hour and every dollar invested in project X means project Y will get less attention. Great businesspeople make the right priorities and stick to them. Just because 1 million other guys had mail order catalogs in 1960 didn’t mean everyone had to have them. Same with e-commerce today.

Michael L. Howatt
Guest
Michael L. Howatt
14 years 9 months ago

Well, a greater difference of opinions than I expected. I believe that if a consumer needs to “feel it, touch it, smell it, try it on, etc.” then you better at least make it look good enough online to get them into the store to do so. Retailers with badly designed web-sites and limited product selections will steer consumers in the other direction.

If it’s a book or DVD or CD then sure, it’s likely to be an on-line success. If it’s a retailer’s lifeline, it better entice consumers with deals they can use in-store and appropriate products to be seen online.

Camille P. Schuster, PhD.
Guest
14 years 9 months ago

A telephony company designing integrated phone and computer systems found that for their clients about 1/3 of the consumers wanted to make purchases in person, about 1/3 of the consumers wanted to make purchases over the phone, and about 1/3 of the consumers wanted to make purchases over the Internet. Instead of the online buying process being a substitute for more expensive in-store or call center choices, clients found that they needed all three of the choices to satisfy consumers. AND that they all need to be done well because a bad experience online would keep consumers from doing business in the retail outlet.

Jack Borland
Guest
Jack Borland
14 years 9 months ago
Is a strong e-commerce presence required in today’s retail environment? Mark Lilien’s comments are right on the money. Any decision to spend dollars on e-commerce capabilities is an investment choice. You may be able to get better return on investment elsewhere. On the other hand, some retailers like Ikea seem to be overlooking an obvious channel – especially given the prevalence of people using the internet to educate themselves, then selecting various channels through which to purchase (phone, web, catalog, store…) Once you make the decision to offer e-commerce, you’ve got to support it with superior shopping tools and superior education tools (for the self-educator/browser). And support it with relevant hand-off opportunities (store locators, live chat, phone rep access). I can understand Beth Canavan of Tiffany’s statement “A purchase that meaningful deserves a more personal exchange.” I would respectfully suggest that most jewelers who can provide a high level of personal interaction through the web will garner a) more web sales and b) more in-store sales. The Tiffany brand being what it is, I wouldn’t… Read more »
Mark Burr
Guest
14 years 9 months ago

I really don’t think that today’s business environment ‘requires’ anything. Some things certainly help, but I don’t think you can say that every single business actually ‘has to’ do anything.

Certainly at least a presence on the internet can be helpful even if it doesn’t allow sales. However, I think each business person or corporation has to make its own decisions as to how they believe that they can best serve their customers.

I sort of liken the premise of the discussion to the interpretation that all retailers have to have a ‘loyalty program’ in order to have loyal customers.

Eliott Olson
Guest
Eliott Olson
14 years 8 months ago

Some stick with rail shipments.

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