February 02, 2007

J.C. Penney CEO, Web 2.0, And Multichannel Forensics

DMNews reports that "multichannel" is the key theme at Shop.org's FirstLook show.

Of interest is the comment from J.C. Penney Chairman/CEO Mike Ullman, who says of direct marketing, "We see the three channels getting more and more blurred. The big book is becoming less important, because the big book is online."

Small businesses and growing businesses need catalogs, because the print version of advertising is still the most cost-effective way to grow a direct-to-consumer business.

However, large businesses like J.C. Penney are going through two dramatic transformations that we all need to keep an eye on.

The first transformation is the death of the telephone/paper relationship, being replaced by e-commerce. This has been happening in earnest since about 1999. J.C. Penney's direct business transitioned this year to more than fifty percent online. Once the online channel is more than fifty percent of the direct business, CFO's become very curious about all those dollars being spent on paper.

The first transformation (telephone/paper to e-commerce) impacted catalogers the most.

The second transformation is just beginning to happen, and may change our businesses far more than e-commerce. The second transformation is the shift in the online channel from e-commerce to experience.

The second transformation (e-commerce to experience) will impact retailers and online pureplays the most. Just because we can purchase merchandise online doesn't mean we want to purchase merchandise online. Retailers who can, in some way, re-create the in-store experience, or significantly complement the in-store experience in a virtual world, will have a huge advantage over online pureplays and online/catalog businesses, who do not have an experience-based channel to please customers with.

The recent bare-knuckled, bloody fist fight between Endless.com and Zappos.com illustrates the desperation online pureplays are feeling. As the second transformation (e-commerce to experience) integrates with the retail experience, businesses like Zappos compete the only logical way they can --- by offering free shipping. Endless trumps Zappos by offering free next-day shipping. Zappos matches Endless, then, Endless trumps Zappos by offering free next-day shipping along with a five dollar rebate.

Websites were constructed to be static, read-only experiences. We built a ton of infrastructure to make e-commerce possible. Over the next decade, this read-only experience will likely be replaced by an experience-based channel. Web 2.0, blogs, wikis, YouTube et.al are the embryonic representation of this transformation.

This is really going to be fun to watch!

This transformation really requires the implementation of multichannel forensics. All businesses with a website must have intimate knowledge of how their customers interact with products, brands and channels.

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