October 17, 2006
BrainTrust Query: When (if ever) are ‘web exclusives’ a wise strategy for multi-channel retailers?
By Dr. Roger Selbert, Editor & Publisher, Integrated Retailing
(www.integratedretailing.com)
Multi-channel integration is increasingly recognized as a desired goal for retailers with stores and web sites. But must web and store strategies relating to marketing, merchandising
and pricing always remain consistent, even identical? If not, then where, and how much should web and store strategies differ?
According to a Gartner report, only one-fourth of multi-channel retailers fully coordinate their brand marketing across channels. Three-quarters of multi-channel retailers, in other words, either fail to share customer information across channels, don’t coordinate marketing activities and/or don’t align promotional activities.
Yet 68 percent of all shoppers now move interchangeably between physical stores, online stores and catalogs (Adjoined Research). Consumers increasingly see a retailer as a single, seamless entity. They don’t distinguish between or among channels, even if the retailer does so itself, and they expect any part of the service and delivery chain to have the same products, policies and knowledge as any other part of the operation.
In certain areas, however, it may be strategically advantageous for some retailers to have different products, promotion and pricing in different channels – aka “web exclusives.” Several upscale apparel retailers, for example, have started displaying trendier merchandise on their online web sites than they offer in their stores. Among such retailers featuring web exclusives are Neiman Marcus, Nordstrom, Saks Fifth Avenue, Talbot’s, Macy’s and J. Crew.
There are several reasons for differentiating products, pricing and promotions in different channels. For one thing, it’s logistics: stores don’t have room to stock everything they carry online. But it’s also strategic: retailers are using online exclusives to try to attract shoppers who don’t usually frequent their stores. If they can convert them online, there is the potential of converting them into loyal multi-channel customers.
There’s also the fact that online shoppers and multi-channel shoppers do tend to skew toward the younger, trendier, more affluent, better educated and more technologically savvy. They also spend more and are more profitable customers, and so are logically worth targeting with special treatment.
Discussion Question: When (if ever) are “web exclusives” a wise strategy for multi-channel retailers?
Offering web exclusives is a risky strategy for retailers. With over 80 percent of shoppers now browsing online before visiting stores, a web exclusive
strategy risks disappointing and thus alienating consumers, losing not just immediate sales but also lifetime sales. Smart multi-channel retailers recognize this, and place in-store
kiosks where customers can order merchandise from the store’s web site and catalog.
The ultimate strategic goal, it seems to us, is customer-centricity. Being customer-centric means centering your company’s goals, growth strategies and tactical operations around
attracting, winning and keeping profitable customers. Implementing customer centricity starts by taking a unified view of customer relationships. This means overlaying data from
across multiple sources to create multidimensional customer profiles, and then translating the data into actionable insights.
The challenge for the multi-channel retailer is to understand which channel the customer prefers for which merchandise and which channel is most profitable per unique customer.
A unified view of every customer across channels is difficult to achieve, but ultimately, will prove financially rewarding.
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A good premise to start with is that we should make moving among the channels as seamless and brand consistent as possible, and, intuitively, that would mean carrying the same products. But then reality strikes:
1) The direct and store divisions are often run by different groups, and have different merchandising teams with different objectives. The incentive is to keep the customer in your space once they are there.
2) Products that are cheap, large and/or heavy that are productive in-store are not productive online, because shipping costs often double the total price.
3) The reality is that consumers respond to different products online vs. in-store. Time and time again, products that test well online, in particular, don’t sell in the stores.
4) Merchandise flows differently through the stores than online, and planning to have everything everywhere at the same time is often unrealistic. So, anything that is online, but not in the store, is then an “exclusive.”
The business dynamics are different, and most major retailers have settled on a mix of crossover and exclusive merchandise on their web sites.
Because most traditional retailers do a much larger percentage of their business in-store, I believe that the opportunity that is being missed sometimes is to use the web site to support the store more effectively — for example, don’t hide the store locator! On the other hand, making the in-store consumer feel like they HAVE to also visit the web site before making a decision is a mistake, unless it is necessary to complete the sale.
Web exclusives are fine, as long as they’re the occasional exception and not the rule. What really bothers consumers is when “everyday” items are omitted from one channel or the other. And consumers really like the ability to access the website while they are in the store. Asking an employee to look something up while the consumer waits is a waste of time for both parties.
Customer-centricity works when it’s profitable. Staples is a great example: they have web exclusives as well as bricks and mortar exclusives. They do this to improve inventory turns, increase margins, and stay competitive within each channel. Sometimes a Staples web exclusive is simply a standard item with a different quantity in the package for a special price. And Staples asks each browser their zip code, so pricing can can be adjusted. Costs (labor, promotion, real estate, transportation, etc.) and competition online versus bricks and mortar aren’t the same, so how else can Staples have a profitable strategy?
I personally don’t believe retailers are making good use of their online presence. It almost seems as if they don’t want the online business to interfere with their brick and mortar infrastructure. The whole point of the online presence should be “demand management.” This means both category and customer targeted promotions that support both consumers and manufacturers. By definition then, it means that the online experience is going to be different than the one received at the store. There will be discounts and assortment varieties available online that are not available in the store. In fact, wouldn’t it be nice if the in-store display said “try it on here, but look for additional colors online”? Consumers could get all the variety without the retailer needing to stock every store with the chartreuse sweater, and the consumer could verify the fit before they order.
Having said all that, I remember the huge mistake one retailer made in the early days of targeted promotions. The “bright idea” was to turn Silver shoppers into Gold shoppers by offering them special incentives. Somehow, word got out. The Gold shoppers were miffed because the special discounts being offered to the “second tier” customers were not available to them. So there is a risk involved, but I still believe that using the online experience to customize the customer experience is where this all has to go. Ask Dell computers.
I notice that most of the comments are with regards to Web exclusives as being on the general website. Another approach is to offer deals via individual solicitation or “Member services” sites. Several retailers I frequent via multiple channels use that as a way to reward guests who are willing to share their emails to further the customer relationship. Whether it’s a formal “Buyer’s Club” or not, these “You’re special to us” statements are always a pleasant and welcome surprise.
Accessing the web site in-store is a given…how crazy is it that it’s still so rare? Even more, it’s amazing that we still too often can’t provide personalized recommendations and direct order of specific products via the web site while folks are in store.
I had an incident last week where I found the perfect pair of pants and wanted the other color. The store I was at didn’t have them and I walked to two other NYC stores (over 60 blocks) to no avail. No one could tell me what other locations actually had them so I came back to Atlanta and found them in a popular mall. I then waited 15 minutes to get someone to open the dressing room door and spent another 15 in the horrifically long checkout line. This is a well known retailers that has no web site for ordering products direct. I hated that I had to work so hard to spend $100 on a pair of pants and it’s a story much too common. It’s a clear example that many retailers are still missing the basics.
Regarding Web Exclusives, they often make sense if strategically utilized. The travel industry has trained consumers that they can be worth it and there are times that we want to shop with a store that is not convenient to drive to (such as a Kohl’s) and the Web Exclusives generate notable additional funds. They would also be appreciated for “early bird specials” around Holiday when the stores most often run out of product within the first 30 minutes…frustrating to those that get up early and wait in long lines in the cold.
The key is choice and ensuring that how the web services are used are indeed part of the global, customer-centric experience built to meet overall business needs.
Web exclusives make a lot of sense for retailers who can sell extended-size apparel or other merchandise that doesn’t fit into the four walls of their brick-and-mortar stores. It’s also a great way to test the waters on higher price points that may not justify chain-wide inventory investment.
The key, of course, is to use web exclusives to drive incremental sales and profit, not just to provide a customer service. However, most multi channel retailers could do a better job marketing their web-exclusive merchandise to customers shopping inside their brick-and-mortar stores, not just reaching out to those already visiting their websites.
One customer, two systems. With almost 70% of the shoppers moving seamlessly between a retailer’s channels, one would think that the information pertinent to the retail-customer relationship would too.
Why is information sharing and cross channel analysis an obscure practice in retail today? The barriers are information silos reinforced by systems and channel-specific organizational structures.
The emerging best practice is to load customer transactions from both store and direct marketing channels into a data warehouse. Information about your cross shoppers will emerge. What are they buying in each channel? What are the key items? What are the cross selling patterns? What about price?
Once you understand your cross shopper, you will be compelled to cross market to them, unifying your message, and promoting with a 360º view.
The discussion is set-up with the following:
“The ultimate strategic goal, it seems to us, is customer-centricity…. Implementing customer centricity starts by taking a unified view of customer relationships. This means overlaying data from across multiple sources to create multidimensional customer profiles, and then translating the data into actionable insights.”
I agree with the goal; I have an issue with the road map. Customer Centricity begins with learning, observing and understanding – if you do that properly, the answers or, at least ideas, will follow.
Multi channel is a distraction – this is about retail and it is about how different customers interact with the retailers. Retailing reflects the behavior and the state of culture. In this article, we see suggestions that are inwardly focused – the call to action is to learn from some of the early adopters. To learn why they shop the way they do (think Best Buy;s Busy Moms persona); to learn why they respond to offers; to study their activity patterns. (What happens if you learn all about the web@home@xmas to store pattern and forget the cellphone@at-school@black-friday to store pattern?)
Respectfully, this article highlights the central disconnect regarding our alignment to the customer – alignment and coordination are nice left brain concepts conjured up from our supply chain bias. We need to coordinate what we learn and how we learn. We can start by taking the market research and customer research budgets from the web, marketing and merchandising and combine them together to start to get a handle on what to do.
I do not like web exclusives. A brand lives in my mind from the sum of the experiences I have, regardless of where those experiences occur. Let me tell you a story. I was looking to buy a computer in 1999 and wanted a Gateway. I could buy it online, by phone, or by walking into their retail stores. I was given three different prices and bundles of free stuff for the exact same product bundle, from each of the three selling channels. all I can say is, my thought was that, boy, these guys don’t get it!
For the reason that you want to keep the brand expression consistent, I’m not in love with web exclusives.
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A good premise to start with is that we should make moving among the channels as seamless and brand consistent as possible, and, intuitively, that would mean carrying the same products. But then reality strikes:
1) The direct and store divisions are often run by different groups, and have different merchandising teams with different objectives. The incentive is to keep the customer in your space once they are there.
2) Products that are cheap, large and/or heavy that are productive in-store are not productive online, because shipping costs often double the total price.
3) The reality is that consumers respond to different products online vs. in-store. Time and time again, products that test well online, in particular, don’t sell in the stores.
4) Merchandise flows differently through the stores than online, and planning to have everything everywhere at the same time is often unrealistic. So, anything that is online, but not in the store, is then an “exclusive.”
The business dynamics are different, and most major retailers have settled on a mix of crossover and exclusive merchandise on their web sites.
Because most traditional retailers do a much larger percentage of their business in-store, I believe that the opportunity that is being missed sometimes is to use the web site to support the store more effectively — for example, don’t hide the store locator! On the other hand, making the in-store consumer feel like they HAVE to also visit the web site before making a decision is a mistake, unless it is necessary to complete the sale.
Web exclusives are fine, as long as they’re the occasional exception and not the rule. What really bothers consumers is when “everyday” items are omitted from one channel or the other. And consumers really like the ability to access the website while they are in the store. Asking an employee to look something up while the consumer waits is a waste of time for both parties.
Customer-centricity works when it’s profitable. Staples is a great example: they have web exclusives as well as bricks and mortar exclusives. They do this to improve inventory turns, increase margins, and stay competitive within each channel. Sometimes a Staples web exclusive is simply a standard item with a different quantity in the package for a special price. And Staples asks each browser their zip code, so pricing can can be adjusted. Costs (labor, promotion, real estate, transportation, etc.) and competition online versus bricks and mortar aren’t the same, so how else can Staples have a profitable strategy?
I personally don’t believe retailers are making good use of their online presence. It almost seems as if they don’t want the online business to interfere with their brick and mortar infrastructure. The whole point of the online presence should be “demand management.” This means both category and customer targeted promotions that support both consumers and manufacturers. By definition then, it means that the online experience is going to be different than the one received at the store. There will be discounts and assortment varieties available online that are not available in the store. In fact, wouldn’t it be nice if the in-store display said “try it on here, but look for additional colors online”? Consumers could get all the variety without the retailer needing to stock every store with the chartreuse sweater, and the consumer could verify the fit before they order.
Having said all that, I remember the huge mistake one retailer made in the early days of targeted promotions. The “bright idea” was to turn Silver shoppers into Gold shoppers by offering them special incentives. Somehow, word got out. The Gold shoppers were miffed because the special discounts being offered to the “second tier” customers were not available to them. So there is a risk involved, but I still believe that using the online experience to customize the customer experience is where this all has to go. Ask Dell computers.
I notice that most of the comments are with regards to Web exclusives as being on the general website. Another approach is to offer deals via individual solicitation or “Member services” sites. Several retailers I frequent via multiple channels use that as a way to reward guests who are willing to share their emails to further the customer relationship. Whether it’s a formal “Buyer’s Club” or not, these “You’re special to us” statements are always a pleasant and welcome surprise.
Accessing the web site in-store is a given…how crazy is it that it’s still so rare? Even more, it’s amazing that we still too often can’t provide personalized recommendations and direct order of specific products via the web site while folks are in store.
I had an incident last week where I found the perfect pair of pants and wanted the other color. The store I was at didn’t have them and I walked to two other NYC stores (over 60 blocks) to no avail. No one could tell me what other locations actually had them so I came back to Atlanta and found them in a popular mall. I then waited 15 minutes to get someone to open the dressing room door and spent another 15 in the horrifically long checkout line. This is a well known retailers that has no web site for ordering products direct. I hated that I had to work so hard to spend $100 on a pair of pants and it’s a story much too common. It’s a clear example that many retailers are still missing the basics.
Regarding Web Exclusives, they often make sense if strategically utilized. The travel industry has trained consumers that they can be worth it and there are times that we want to shop with a store that is not convenient to drive to (such as a Kohl’s) and the Web Exclusives generate notable additional funds. They would also be appreciated for “early bird specials” around Holiday when the stores most often run out of product within the first 30 minutes…frustrating to those that get up early and wait in long lines in the cold.
The key is choice and ensuring that how the web services are used are indeed part of the global, customer-centric experience built to meet overall business needs.
Web exclusives make a lot of sense for retailers who can sell extended-size apparel or other merchandise that doesn’t fit into the four walls of their brick-and-mortar stores. It’s also a great way to test the waters on higher price points that may not justify chain-wide inventory investment.
The key, of course, is to use web exclusives to drive incremental sales and profit, not just to provide a customer service. However, most multi channel retailers could do a better job marketing their web-exclusive merchandise to customers shopping inside their brick-and-mortar stores, not just reaching out to those already visiting their websites.
One customer, two systems. With almost 70% of the shoppers moving seamlessly between a retailer’s channels, one would think that the information pertinent to the retail-customer relationship would too.
Why is information sharing and cross channel analysis an obscure practice in retail today? The barriers are information silos reinforced by systems and channel-specific organizational structures.
The emerging best practice is to load customer transactions from both store and direct marketing channels into a data warehouse. Information about your cross shoppers will emerge. What are they buying in each channel? What are the key items? What are the cross selling patterns? What about price?
Once you understand your cross shopper, you will be compelled to cross market to them, unifying your message, and promoting with a 360º view.
The discussion is set-up with the following:
“The ultimate strategic goal, it seems to us, is customer-centricity…. Implementing customer centricity starts by taking a unified view of customer relationships. This means overlaying data from across multiple sources to create multidimensional customer profiles, and then translating the data into actionable insights.”
I agree with the goal; I have an issue with the road map. Customer Centricity begins with learning, observing and understanding – if you do that properly, the answers or, at least ideas, will follow.
Multi channel is a distraction – this is about retail and it is about how different customers interact with the retailers. Retailing reflects the behavior and the state of culture. In this article, we see suggestions that are inwardly focused – the call to action is to learn from some of the early adopters. To learn why they shop the way they do (think Best Buy;s Busy Moms persona); to learn why they respond to offers; to study their activity patterns. (What happens if you learn all about the web@home@xmas to store pattern and forget the cellphone@at-school@black-friday to store pattern?)
Respectfully, this article highlights the central disconnect regarding our alignment to the customer – alignment and coordination are nice left brain concepts conjured up from our supply chain bias. We need to coordinate what we learn and how we learn. We can start by taking the market research and customer research budgets from the web, marketing and merchandising and combine them together to start to get a handle on what to do.
I do not like web exclusives. A brand lives in my mind from the sum of the experiences I have, regardless of where those experiences occur. Let me tell you a story. I was looking to buy a computer in 1999 and wanted a Gateway. I could buy it online, by phone, or by walking into their retail stores. I was given three different prices and bundles of free stuff for the exact same product bundle, from each of the three selling channels. all I can say is, my thought was that, boy, these guys don’t get it!
For the reason that you want to keep the brand expression consistent, I’m not in love with web exclusives.