September 24, 2007

Does A Website Drive Sales In Retail Stores?

Please click on the image to enlarge it.

One of the more flummoxing issues facing multichannel retailers is quantification of the sales that a website drives to a retail store.

There aren't a lot of "best practices" for quantifying this issue.

Some folks want to give the website credit for any purchase initiated online. For instance, if a customer ordered online, and picked-up the item in-store, some folks want to give the website "credit" for that order. Some feel that any retail purchase that was researched online deserves to be credited, at least in-part, to the online channel.

Retail folks will claim that without stores, the website never would have existed, and therefore, the stores should get credit for all orders, even orders that happen online. Many retailers include online sales in their comp store sales calculation --- artificially propping up tepid retail comps with +25% online growth. Read the 10-K statements issued by retailers, you'll see that this is a common practice.

Multichannel Forensics can be used to simulate what might happen if a website no longer existed, was no longer there to support store sales.

Using this free spreadsheet, the analyst can plug in retail/online metrics, view the forecast, then zero-out the online portion of the business.

In the attached example, retail sales were growing at about four percent per year. Once the website is shut down, the simulation suggests that retail sales stop growing. Of course, all web sales disappear as well.

Theoretically, some assumptions can be made for perceived cannibalization between retail and online sales. In lieu of the actual, quantifiable metrics, this example shows that the website probably has a real, long-term impact on retail sales.

Plug the dynamics of your business into the spreadsheet. You can get an introductory view into the impact your website might have on retail growth.

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