April 04, 2007

The Role Of A Website In A Multichannel Retail Business

Ultimately, our customers will decide the role of a website in a multichannel retail business.

Catalogers are experiencing a very different set of dynamics when strategically considering the role of a website. There is an odd interplay between catalog advertising and online purchasing that causes catalogers consternation.

For retailers, the relationship is much easier to understand.

Multichannel Forensics suggest that when two channels are involved, one channel frequently benefits from the efforts of the other. In the case of the online channel and the retail channel, retail is ultimately the "order taker". The online channel frequently acts as the "information channel".

As an example, I purchased a television at Circuit City last week. I did all of my research online, comparing Circuit City to Best Buy and other retailers. I chose Circuit City because they had a better price on the television I wanted, and installation was one hundred dollars cheaper than it was at Best Buy.

In this case, the internet provided the forum for my shopping experience. Circuit City's website did a reasonable job of presenting information to me. I even put my television in the shopping cart, so I could see the price. But the website did not "convert me", from a traditional web analytics standpoint. Some pundit will clobber Circuit City for having a paltry online conversion rate, for failing to convert my shopping cart.

The website did exactly what is was supposed to do --- and receives no credit for the work it did.

The retail channel took my order. An installer (another channel???) will hook me up next week.

If this relationship exists, you'll easily see it in your Multichannel Forensics analysis. The online channel will be in "Acquisition/Transfer" mode. This means that, for online purchasers, fewer than forty percent of them will purchase again online next year. Furthermore, those customers are likely to switch their allegiance to the retail channel. The retail channel operates in "Retention/Isolation" mode. This means that at least sixty percent of last year's retail channel customers will purchase in retail again next year --- and these customers are unlikely to purchase online next year.

In this example, the website plays maybe the most important role in connecting the customer to the retailer.

Internet Research -----> Website Visit -----> Retail Or E-Commerce Purchase -----> Installer Visit
The internet is a gigantic ecosystem where customers research merchandise opportunities. The website is the retailer's best chance to provide a customer the information necessary to chose the retailer's brand over another retailer. The website is a much smaller, more controlled ecosystem, playing a critical role in the purchase process.

E-commerce should be viewed separately from the role of the website. E-commerce is only about taking an order that is to be delivered to a customer.

When we separate E-commerce from the website experience, we immediately open ourselves to an endless array of multichannel opportunities.

Retail, because of its three-dimensional, human, warm, hopefully inviting nature, will garner the vast majority of purchases.

The website, not E-commerce, becomes the critical link between customer and brand in multichannel retail. A Multichannel Forensics analysis should illustrate this fact --- one should see that E-commerce customers transfer back to retail, while retail customers generally maintain their channel loyalty in stores.

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