Magazine Article | December 1, 2000

Bricks Provide Foundation For Online Selling Strategies

Source: Innovative Retail Technologies

Online shopping is increasing and so are the options to buy. What are the benefits of adding retail Internet clicks to your brick-and-mortar enterprise?

Integrated Solutions For Retailers, December 2000

A building's foundation gets its strength from the mortar that holds the bricks together. The same is true for brick-and-mortar retailers that reach to the Internet as an additional selling channel. The bricks may change to clicks, but the mortar, or the basic business practices of the company, needs to remain constant.

Many companies that have succeeded in the traditional retail world are taking their products online, but some found it's not as easy to cement a position in cyberspace as it is in three-dimensional space. It takes more than a storefront and inventory to succeed. The click-and-mortar retailers that are surviving have taken an enterprise-wide approach to sales by integrating all the channels. They continue to treat their customers with the same quality consumers have come to expect, thus ensuring loyalty, no matter how transactions are made. Steven Greenwood, vice president of Magstar Inc. and a former retailer, and Paul Becker, director of marketing of Magstar Inc., speak about the addition of online selling for retailers.

What misconceptions do retailers have about incorporating the Internet as a new sales channel?
SG (Steven Greenwood): Some consumers primarily use a retailer's e-side for inquiry or product knowledge before they go to the stores. When first implementing sites, retailers are finding that actual sales activity does not meet their expectations. A lot of retailers misjudge the amount of additional revenue the Web site will produce. Another issue is product fulfillment. There is the e-side and the back end side, but not all retailers make sure the pieces work together. A lot of retailers go in believing that e-commerce is going to open up the flood gates, and initially it doesn't. Retailers must develop business concepts outside their normal business models to handle a new sales channel.

PB (Paul Becker): Retailers tend to rush into e-tailing. They get caught up in the hype and euphoria of high technology and competitive pressures. Many assume that if they build a Web presence, consumers will buy. However, some do not recognize that all product categories are not suited to e-tailing. Low-involvement products such as books, electronics, and music are more viable than high-involvement items such as high-margin fashion goods. Consumers like to see, touch, feel, try on, and return goods right then and there.

What is different about a click-and-mortar strategy compared to a traditional retail strategy?
(SG): Retailers need to provide customers with the capability of being click customers while treating them as brick customers. Make them feel like they are going into a store. If someone goes into a brick-and-mortar store and an item isn't on the shelf, there is someone they can talk to. In e-tailing there isn't that personal contact. So, in designing a Web site to promote new sales, retailers have to make sure that they are still providing a personalized shopping environment. There are some things retailers need to look at differently, however. E-tailing gives the ability to direct market to consumers. Access to e-mail addresses and customer profiles gives retailers the ability to focus product information to the customer based on purchasing history.

(PB): There are different organizational challenges. For example, the retailer needs to decide whether it will operate the Web site as an integral component with a team drawn from the various parts of the enterprise, or as a separate division. Traditional retailing has longer planning and execution cycle times than an e-store. E-tailing is similar to mail order catalog processing operations in terms of taking and fulfilling orders. Mail order has the real-time stock position and product delivery infrastructure already in place. Traditional retailers have to implement the infrastructure to support the immediate demand of online fulfillment.

Why are some retailers that tried it, retreating from the e-tailing world?
(SG): Many retailers tried to jump onto the e-tailing bandwagon without doing a proper strategic analysis. We always warn retailers about making sure the two sides, the traditional brick-and-mortar and the new e-tailing operation, work together as opposed to against each other. Too many companies look at e-commerce as a separate realm of business rather than saying they have a single business environment through multiple channels. They separate e-customers from regular retail shoppers. Retailers need to look at what made them successful in handling their customers and then do the same thing through the e-side.

(PB): The retailer must be prepared to see a return on investment not measured in dollars, but rather by intangibles such as brand image and customer loyalty. It also depends on whether they are selling a high- or low-involvement product. Something like a CD is low-involvement. But a market like fashion is high-involvement because it is more subjective. Some retailers recognized their product mix as high-involvement and inappropriate for the Internet environment. Perhaps for them, the Web site would better serve as a marketing or information tool.

What technical glitches do retailers run into when launching an e-tailing site?
(PB): Web servers need to accommodate peak loads of ordering and shipping merchandise. Security is an issue when processing payment over the Internet as well as when guarding the server against hardware failure and external hacking attacks. Also, popular Web browsers don't adhere to a common standard. Unless the IT department develops the code to handle variances, the site may not look consistent to customers using different browsers.

How will selling online affect an enterprise's warehouse management?
(SG): The picking, shipping, and handling environments of traditional stores and e-tailing are different. In the Web world, packing and shipping occurs on an individual basis rather than in large orders. The methodology of warehouse management and verification of e-orders are different. If the warehouse has never handled mail order, the impact on operations and logistics is quite substantial. The retailer needs to ensure that it can perform the required order processing and integrate this with the Web site.

What customer relationship management adjustments need to be made for Web customers?
(SG): Companies try to use their Web sites as vehicles to collect customer data. The issue is not just collecting, but managing customer information. Customers should feel that giving their profile benefits them and not just the retailer.

(PB): Consumers need to have confidence that their information is private and secure. Optionally, they may want to be able to order without any data being retained. Another important feature is the ability to update information and check order status of their purchases. Poor product fulfillment or problems with the return process can cause a loss or decrease in customer loyalty.

How do e-tailers respond to customer expectations?
(PB): Basically, customers expect that if a retailer takes an order, it will deliver the goods. E-tailers must integrate with enterprise systems to ensure stock availability and timely order processing. Retailers must commit merchandise for the e-side based on activity. This is a key component in maintaining brand loyalty.

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