The New Realities of Multichannel

May 15, 2005 9:30 PM  By

By now you’ve seen the stats: A mean 35.5% of catalogers’ sales last year came via the Internet, according to our recent Benchmark Report on Operations (April issue); nearly 80% of consumers use stores, catalogs, and the Internet interchangeably (Adjoined Research Report on Retail Demand 2005); during the 2004 holiday season, 29% of catalog-driven purchases were completed in stores, while another 36% occurred online (DoubleClick). ▪ One thing is clear: When it comes to marketing media and sales channels, less is not more. ▪ But more channels can mean more problems, more issues to resolve, more solutions to unearth. It’s little wonder that 38% of participants in our Benchmark Report on Critical Issues and Trends (December issue) said that managing multiple channels was one of their top marketing concerns, up from 31% the previous year. ▪ Nonetheless, companies that at one time thought of themselves exclusively as catalogers or as retailers are giving new life to the management cliché about “turning challenges into opportunities.” Multichannel Merchant spoke with top executives at nearly a dozen such companies, to get their take on doing business in a multichannel world.

John E. Zawacki

president/CEO, Blair Corp.

Based in Warren, PA, Blair Corp. sells apparel and home goods through four catalog titles (Blair Men’s, Blair Women’s, Blair Home, Irvine Park), two Websites, and three stores. The cataloger’s sales for 2004 were $496.1 million.

What’s your definition of a multichannel merchant? A merchant whose objective is to provide its customers with the most seamless and consistent buying experience by focusing on meeting the customers’ shopping needs regardless of the chosen channel.

Can you discuss your biggest multichannel success story? Launching and accelerating the growth of Blair.com during a challenging retail environment (and with a customer base that did not easily embrace online shopping) was certainly significant. Many of our loyal customers have told us that their first online purchase was with Blair. We are also pleased to have built a business that not only facilitates customer migration where appropriate but also generates significant revenue through online portal advertising, affiliates, search engine marketing, and other revenue centers. The Web is bringing new customers to Blair as well.

Where do you see your company and the industry, in terms of channel opportunities, five or ten years from now? With the online business growing at a greater rate than catalog and with our customers’ increasing acceptance of this channel, the percentage of business that we generate online is likely to increase, and we will continue to invest in systems and infrastructure that are aligned with this shift. Other catalogers will continue to invest heavily in their online efforts and will no doubt continue to explore brick-and-mortar opportunities where feasible.

Conversely, I would expect store retail to more aggressively explore the online channel. DRTV and radio may also receive some attention as our industry looks to overcome the challenge of marketing “clutter” and find new ways to reach customers.

Overall, the trend toward industry consolidation should continue. This trend drives home the need to ensure that the multichannel marketing approach is efficient and offers an exceptional and consistent customer experience.

Tracy Wan

president/COO, Sharper Image Corp.

San Francisco-based Sharper Image Corp. sells high-tech gifts and lifestyle products via a monthly print catalog, a Website, solo mailers, direct TV, and more than 180 stores nationwide, in addition to sales teams that sell products for corporate incentive programs and wholesale to domestic and overseas retailers.

What’s your definition of a multichannel merchant? For the Sharper Image, being a multichannel merchant means that our main channels for reaching customers — catalog, stores, Internet — all work together to give the customer an extraordinary and more satisfying shopping experience that is consistent among the channels.

For example, we send out more than 95 million catalogs to current and potential customers. Each catalog prominently refers to our Internet site and store locations, while our Internet site makes finding and reaching our stores easy. Similarly, our stores advertise our Internet presence as well as provide catalogs. All of our channels use the same packaging and graphics so that the shopping experience is consistent for the customer.

We also take advantage of the unique characteristics of each of our channels. For example, Internet may be able to reach customers more quickly and in large distribution through e-mail campaigns that encourage them to purchase in any of the channels.

Each of our channels is leveraged by the others and cooperates to deliver an overall better customer experience and higher sales per customer than if each were a stand-alone business. Our customers can use the channels in any way they please for their convenience — and this only benefits the overall business.

Eric Faintreny

chairman/CEO, Redcats USA

New York-based apparel and home decor merchant Redcats USA has more than a dozen catalog and Web brands, including Roaman’s, Chadwick’s, KingSize, BrylaneHome, and Lane Bryant Catalog.

How does your company make the most of the multiple channels available? I don’t think we are unique. We are developing our Internet sales as quickly as we can. We have changed the organization — we used to have a separate business unit covering the Internet. Now we want to have a closer relationship with our various channels. After that, it involved recruiting new customers to the Internet. It was very important to develop our employees’ skills.

We might at some stage open up stores eventually. When you look at the American market, most retailers — Victoria’s Secret, Coldwater Creek — have stores as well as [direct divisions].

How does the reality of multichannel marketing compare with your earlier conceptions? Are you where you thought you’d be five or ten years ago? I was not in the USA five years ago [Faintreny had been chairman/CEO of Redcats Nordic prior to joining Redcats USA in 2004], but my perception of it is that even five years ago we were considering each channel separate and invested in one target. Now we are all arriving in the same market with the same customer. It has happened faster than expected.

Where do you see your company, in terms of channel opportunities, five or ten years from now? I believe we should all be looking at interactive video, having in mind interactive TV. We are looking at the issue — following the Internet with a new medium available to retailers but not interactive TV as we know it now. Any version, a combination of what we know as the Internet and interactive TV, would not surprise me at all.

Craig Dewey

senior vice president, marketing and merchandising, Norm Thompson Outfitters

In addition to the catalog and Website of the flagship gifts, apparel, and home decorbrand, Portland, OR-based Norm Thompson Outfitters operates catalogs and Websites for outdoor apparel title Sahalie and home and garden products brand Solutions; it also has one Norm Thompson retail store and five outlets.

Are you where you thought you would be, in terms of multichannel marketing, five or ten years ago? I don’t think we believed the Web would grow so fast as a transactional channel. Now we are learning how to use the Internet to market more effectively to our customers. It has reminded us that our call center is more than a transactional channel as well. We are currently staffing and training to transform it into a more proactive marketing channel.

Where do you see your company, in terms of channel opportunities, five or 10 years from now? In the next five years we see ourselves shifting to creating content for the Websites and editing content for print. Now it’s the opposite. We see ourselves focusing on the Web and print catalogs. But we have not ruled out testing a bricks-and-mortar retail concept in one or more of our brands.

What has been the most challenging aspect of adapting to the multichannel universe? We struggle with finding the most accurate way to attribute orders between our two channels. We’re also worried about accounting for lost demand as our Web sales grow.

Michael Muoio

president Miles Kimball Co.

Oshkosh, WI-based gifts, stationery, and housewares merchant Miles Kimball Co. consists of not only the eponymous brand, but also photo and archival accessories title Exposures, general merchandise catalog Walter Drake, and housewares catalog Home Marketplace, along with their complementary Websites.

How does your company make the most of multiple channels? We try to harmonize creative and promotional overlays — for instance, we include an electronic version of the paper catalog at the site for browsing. We also carry all available product on the Website that cannot be contained in the catalog.

How does the reality of multichannel marketing compare with your earlier conceptions? Are you where you thought you’d be five or ten years ago? We had no idea [our Websites] would be a $40 million business ten years ago. We knew we had great brands, but to reach up to 40% of volume on one of our brands would not have been expected. Our goal is 50% on the Web by 2008.

Jack Rosenfeld

president, Potpourri Group

Potpourri Group, a Medfield, MA-based multititle merchant of gifts, decor, and craft items, has 12 catalog and Internet brands, including The Stitchery, Expressions, Back in the Saddle, and Young Explorers.

What’s your definition of a multichannel merchant? I think that to qualify as a multichannel seller, a catalog company must do more than simply allow the customer to order by using the Internet; I think it has to have a robust Website that truly allows a customer to shop from the site as well as order.

How does your company make the most of the multiple channels available? We advertise our Websites extensively in our paper catalogs and are optimizing organic search for our titles. For some titles, we use affiliate programs and are expanding these to other titles this year, as well as testing paid search.

Where do you see your company, in terms of channel opportunities, five or ten years from now? I see a continuing expansion of Internet selling to reach 50% or more [of total sales] within five years but that it’ll peak at that or maybe 65% in ten years. It is also possible that within ten years, one or more of our titles could be appropriate for the retail channel, something we do not do at all now.

Geric Johnson

vice president, direct marketing Frederick’s of Hollywood

Based in Hollywood, CA, women’s apparel merchant Frederick’s of Hollywood has more than 150 stores in addition to a print catalog and a Website.

What’s your definition of a multichannel merchant? A multichannel merchant is one that maximizes all touch points with consumers for maximum effectiveness of marketing campaigns. Benefits of well-planned multichannel integration are increased customer satisfaction and enhanced consumer loyalty.

How does your company make the most of the multiple channels available? At this time, Frederick’s is at the early stages of integration. We recognize the opportunities and are building the necessary infrastructure to best exploit this endeavor. Frederick’s plans for 2006 would include increased loyalty programs, conversion programs to increase frequency of purchase, and seamless cross-channel advertising and promotional campaigns.

What’s been your biggest multichannel success story? Our biggest success is one that is not necessarily apparent to the outside observer. For Frederick’s of Hollywood, our commitment to multichannel integration has primarily been realized through improved infrastructure, upgraded point-of-sale capabilities, and design of a synergistic underlying database of contacts that will support roll-out of each element of our multichannel strategy. Together these allow for seamless execution of each element of our multichannel strategy when specific milestones have been met.

What has been the most challenging aspect of adapting to the multichannel universe? Technical integration of diverse information-processing platforms in a seamless manner is a challenge that requires constant attention and demands highly capable staff to execute initiatives in a manner that is transparent to the consumer.

Tim Ford

president, Automotive Specialty Accessories and Parts Co. (ASAP)

Parent company of the J.C. Whitney and Stylin’ Concepts brands, Chicago-based ASAP operates three Websites and two stores in addition to mailing 16 titles in the U.S., Europe, and Japan.

How does your company make the most of the multiple channels available? We coordinate all promotions between our catalog and our e-commerce-based marketing efforts. Both staffs meet regularly to hammer out what is the best promotion and product offering to present to both our existing and potential customers.

How does the reality of multichannel marketing compare with your earlier conceptions? While we have always felt that e-commerce marketing was a logical expansion of the direct-to-consumer remote shopping experience and that it requires many of the same tools and measures as catalog marketing, the technology has expanded the complexity in many ways.

For instance, merchandising and creating a print catalog is a two-dimensional activity; you have the picture and the catalog copy. In the e-space you still have to have the correct artwork, copy, and overall presentation to appeal to the potential customers, but you also have to know how both your system and the search engines search for the product.

John Baumann

president, Swiss Colony

Monroe, WI-based food, apparel, home decor, and gifts merchant Swiss Colony operates seven catalog titles, including Ginny’s, Midnight Velvet, and Seventh Avenue, and their accompanying Websites.

How does the reality of multichannel marketing compare with your earlier conceptions? Are you where you thought you’d be five or ten years ago? Our usage of multichannels has turned out to be relatively close to what we would have predicted. Most of our customers first learn about us by being exposed to our catalogs, but a good share of them seek out more information and/or ultimately place orders via the Internet.

Where do you see your company, in terms of channel opportunities, five or ten years from now? We’ll continue to probe our customers as to how they’d like to shop from us. My guess is that we’ll continue to offer multichannel customer communications, but we’ll see greater emphasis placed on the Internet and Internet search capabilities.

David Vander Zanden

president/CEO, School Specialty

School Specialty, a Greenville, WI-based merchant of products for schools, teachers, and others involved in educating pre-K, grade school, and high school students, has annual sales of roughy $1 billion. Its brands include Childcraft, Sax Arts & Crafts, and Sportime; it sells via catalogs, the Internet, and sales forces.

How does the reality of multichannel marketing compare with your earlier conceptions? In our business the Internet has grown slower than in most other businesses. We thought the Internet would be going a lot faster. It’s running 10% of our total volume; that’s $100 million, but we thought it would catch on a lot quicker. Then again, our growth on Internet orders is up 40% this year.

Where do you see your company, in terms of channel opportunities, five or ten years from now? We’re not sure we’ll see anything new. We’ll do a little bit of everything. Maybe Internet may change, be a bit larger part of our sales order force. We’ll still have e-mail, catalogs, sales force, but it will shift more toward the Internet.