Live from NRF: Online Retailing Out, Multichannel Retailing In

Jan 18, 2006 8:20 PM  By

New York–The gravestone on the fourth slide of Forrester Research vice president Carrie Johnson’s presentation at the National Retail Federation’s annual convention Monday was the proverbial picture that said 1,000 words. Online Retailing, it declared, is dead. Long live Multichannel Retailing.

Though online sales (including of travel) last year grew 7.7%, to $172 billion in 2005, Johnson said that The State of Online Retailing 2006 report produced by NRF’s Shop.org and Forrester could instead be referred to as the State of Multichannel Retailing. Online retailing, Johnson said, is now a part of retailers’ total strategy, and very few retailers are solely online entities anymore.

“Retailers no longer treat online as a separate channel,” Johnson said. “The online shopper is becoming more mainstream. About 40% of the U.S. population now shops online, but that same percentage has researched a product online and bought it offline, influencing more that $100 billion in offline sales.”

Brian Devine, chairman of Petco Animal Supplies, said 59% of its online customers also buy product in store. In 2005 more than 3 million unique users used Petco.com to locate a store, while 1.5 million members of its PALS loyalty club went online to look up information about their status.

Devine added that the average order value at Petco.com is 2.5 times higher that that of the Petco stores. He attributed this to consumers’ wish to have heavier items such as aquariums shipped to their homes instead of risking breakage by carrying them out of a store.

Terry Lundgren, CEO/president of Federated Department Stores, noted that 72% of sales at Macys.com were made within 20 miles of a physical Macy’s store. He said he stopped worrying that the growth of its online channel would cannibalize its in-store sales. While Macy’s makes “a lot of money” online, the company makes “a lot more money” in its stores.

“If this is what customers want, then this is what we’ll give them,” Lundgren said, adding that the volume of sales done at Macys.com is equal to that of 10 stores. “And when a customer returns an item bought online to a Macy’s store, it’s a great opportunity for us to turn that customer into a loyal Macy’s shopper.”

Though consumers continue to zigzag in and out of channels, online sales will continue to rise annually. The NRF/Forrester study predicts online sales of $192 billion this year and a leap to $316 billion annually by 2010.