January 18, 2011

Multichannel Wednesday: E-Commerce and Retail

One of the least understood relationships in the world of "multi-channel" is the relationship between e-commerce and retail.

In most cases, here's what happens to a newly acquired online buyer.
  • Acquisition = 100% e-commerce, 0% retail.
  • First Year = 50% e-commerce, 50% retail.
  • Second Year = 30% e-commerce, 70% retail.
  • Third Year = 25% e-commerce, 75% retail.
In other words, retail folks should adore the e-commerce channel, because e-commerce is part of a two-step process in generating retail sales ... not to mention the research that happens when the customer uses the website to shop a store.
In most cases, here's what happens to a newly acquired retail buyer.
  • Acquisition = 0% e-commerce, 100% retail.
  • First Year = 5% e-commerce, 95% retail.
  • Second Year = 8% e-commerce, 92% retail.
  • Third Year = 9% e-commerce, 91% retail.
Most of the time, the e-commerce customer is "multi-channel".

Most of the time, the retail customer is "single-channel".

Anybody who has truly measured the impact of direct marketing activities on retail-only customers knows this ... the majority of direct marketing activities don't work to the level that they work on e-commerce customers ... and direct marketing activities don't work on e-commerce customers like they work on the phone-based 55+ rural direct marketing customer.

This means that your "multi-channel" marketing strategies require an adjustment.  Communicating to a retail customer is very different than communicating to a traditional direct marketing customer.  In fact, mass-based communications tend to work to traditional direct marketing customers, while one-to-one style communications (i.e. a store employee actually calling a retail-only customer) tend to work well among retail-only customers.

And then there's mobile ... more on that later ... let's just say that what I mentioned in this post is not likely to hold for mobile ... mobile and e-commerce will act differently, mobile and retail will act differently.

4 comments:

  1. Anonymous6:18 AM

    OMG!

    ReplyDelete
  2. Mark Matiszik8:35 AM

    Great point, Kevin. Ah to go back to the old catalog-only days when, knowing your exact historical retention percentages, etc., you could easily calculate the expected lifetime value of a new customer (so that you could compare it to the acquisition cost of that customer).

    Now, with most retailers not even attempting to identify their retail transactions back to a unique customer, you ask about expected lifetime value and get a blank stare in return.

    Business would be so easy if it weren't for these oddly behaving customers, wouldn't it?

    ReplyDelete
  3. Hi Kevin,

    Very well developed though and a very clear message. We all want to see/feel/touch things and ideas before we buy. So, I can see how the e-commerce plans seeds of awareness that helps in retail as well. People would go see, do once the mindset is created.

    Do you have any pointers to resources or your other blog posts/articles that talk to how companies can develop strategy to go e-commerce when they are retail only?

    Thanks,

    -Deven

    ReplyDelete
  4. I doubt I'd have anything on this blog ... most of that stuff was written in the 1995 - 2003 time frame, you might consider searching Google for it.

    Thanks,
    Kevin

    ReplyDelete

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