Multichannel Goes Mainstream

May 01, 2004 9:30 PM  By

E-commerce today represents almost 4% of retail sales. Marketers are compelled not only to compete in this channel but to strive for best-in-class execution. This is a daunting challenge, as there are incessant choices and opportunities from organizational, merchandising, marketing, and operational perspectives. Each choice needs to be weighed for short- and long-term costs relative to corresponding return on investment.

The consumer now expects to shop across all channels and considers the Web a shopping channel of choice. No longer treated as a “silo,” e-commerce is likely be an integrated division of the company — and for many companies it’s the fastest-growing and most profitable division.

Challenges remain, of course, but clearly the Web has proved wrong those skeptics who thought people would never be willing to order via the Internet. Opportunities exist to garner a greater share of the consumer’s wallet while achieving operating efficiencies via this cost-effective channel.

As we at The E-tailing Group completed our Third Annual Merchant Survey of more than 300 online marketers, it seemed an ideal time to reflect on the progress, peril, and potential of the Internet. Among our findings:

  1. The Web is mainstream

    A company’s e-commerce division is no longer viewed as distinct from the other channels and divisions. Eighty-seven percent of survey participants said that their company’s e-commerce sites are integrated into the overall business rather than operating as a separate organization. Nearly half of the respondents said that the Web division doesn’t even have a separate P&L, further emphasizing today’s prudent strategy of “one store, many channels.”

  2. ROI and bottom-line thinking dominate

    Because the focus is on return on investment, initiatives most likely to improve profitability receive priority. Respondents to this year’s survey ranked “profitability” and “revenue growth” even higher as corporate goals than did last year’s participants. Marketers are analyzing every dollar spent; merchandising features are under intense scrutiny to ensure their contribution to the bottom line.

    A look at which marketing strategy objectives respondents considered “very important” or “important” also indicates the emphasis given to profitability and sales growth:

  3. Multichannel integration abounds with opportunities…and obstacles

    We are in the infancy of addressing integration issues as merchants struggle to deliver a channel-agnostic presence to the customer. The most common challenges deal with standardizing and integrating the multichannel shopping experience. Promoting the Web extensively in the catalog has proven to be a very cost-effective strategy. According to our survey, print catalogs are responsible for roughly 19% of respondents’ e-commerce demand.

    Web functions such as “browse by catalog” and “catalog quick shop” no doubt aid the offline-to-online transition, creating a shopper-friendly Web version of the print book. In fact, 51% of survey participants rated “browse by catalog” functions of value; 57% rated “search by catalog” just as valuable.

    Marketers with stores are continuing to capture e-mail names and promote the Website via signage and collateral. Conversely, the Web enables robust retail locators that provide directions to stores and information about special events. Companies also are emphasizing cross-channel conveniences such as the ability to pick up at stores — and if necessary return to stores — merchandise ordered online.

  4. Resources are challenged

    The number of workers dedicated to the Web is small relative to the results, particularly given the future opportunity that online marketing provides the organizations. Only 26% of the e-commerce investment among survey participants is being outsourced to third-party vendors.

  5. Service must be a priority

    The most successful multichannel marketers recognize that exemplary customer service is essential. Today there are numerous ways to talk to the customer, including e-mail exchanges and live chat, although the latter’s penetration and merchant value rankings grow only slightly each year.

  6. Merchandising with an eye to visitor conversion must be emphasized as well

    Given the bottom-line focus mentioned earlier, how to increase conversion rates currently dominates merchant discussions. On average 3% of visits to survey participants’ sites end in an order.

    Among the site tools that respondents most value for increasing conversion rates are the ability to search the online store by keyword (rated valuable by 91% of respondents), cross-sells and upsells featured on product pages (78%), and pages or sections devoted to new products (69%) or to best-sellers (64%).

Putting the data to use

Looking ahead, remember that keeping the customer top of mind always pays off. Whether that means swiftly executing in-store returns or shifting shoppers online to browse by catalog, there is no room for second best.

Shoppers online are demanding and expect that you will deliver a comprehensive and efficient cross-channel shopping experience. With multichannel merchants continually upping the ante you must be prepared with a plan. Here’s our recommendation:

  • Benchmark your site against your competitors and best-in-class merchants.

  • Seek an annual third-party audit to assess your shopping experience from merchandising and customer service perspectives.

  • Prioritize the marketing and selling opportunities and how they deliver to your company’s bottom line, in both the short term and the long term.


Lauren Freedman is president of the Chicago-based E-tailing Group, which helps online marketers improve customers’ multichannel shopping experiences, and the author of It’s Just Shopping.

Objectives considered “important” or “very important”

94% Customer acquisition 86% Drive traffic to site
93% Customer retention 64% Minimize shopping-cart abandonment
91% Convert browsers to buyers 55% Be part of an integrated multichannel initiative

How Respondents Rate Web Functions

Very Valuable Valuable Somewhat Valuable Not Very Valuable Not At All Valuable Not On the Site
Search/order by catalog 29% 20% 8% 5% 1% 38%
Browse by catalog 17% 17% 17% 5% 3% 41%
Retail locators 13% 16% 12% 7% 3% 49%
As advertised in newspapers/fliers 5% 11% 12% 14% 5% 53%
As advertised on TV/radio 5% 10% 9% 10% 6% 60%

Most Valuable Buyer Conversion Tools

Keyword search 91%
E-mail as a merchandising tool 89%
Sales and specials 89%
Seasonal promotions 84%
Cross-sells/upsells on product page 78%
First-time buyer tools 70%
“What’s new” section 69%
Advanced search 66%
Affiliate programs 64%
Top-sellers section 64%
Gift centers/suggestions 59%
Cross-sells/upsells in shopping cart 58%
Search/order by catalog 57%

Where the Customers Are Coming From

The plurality of Website visitors come to a site simply by typing in its URL. This is not to underestimate the importance of search engine optimization (SEO), affiliate programs, or other methods of driving traffic, however. After all, for a visitor to know a site’s URL, it needs to be aware of the company — and SEO, affiliates, and portals are among the many ways of increasing customer awareness. As for rumors of the print catalog’s demise, don’t believe ‘em: Catalogs are the second most popular source of visitors, accounting for 19% of site traffic.

SOURCES OF SITE VISITORS

Direct to site via URL 27%
Catalog 19%
E-mail 14%
Search engine optimization 11%
Affiliate programs 9%
Traditional portal deals 4%
Comparison shopping engine 3%
E-mail to prospecting list 2%
Alternative portals 2%

Methodology

More than 300 online marketers filled out a 40-question survey for The E-tailing Group’s Third Annual Merchant Survey. Thirty-six percent of respondents were CEOs, presidents, principals, or vice presidents/general managers. Another 52% were directors or managers. Companies ranged in size from less than $20 million in annual sales (39%) to more than $1 billion (14%). Seventy-three percent of respondents worked at business-to-consumer companies, 4% at business-to-business firms, and the rest at companies that sell to both consumers and businesses.

Hungry for more e-commerce statistics?

Check out Catalog Age’s exclusive I.Merchant Survey, appearing in the upcoming July issue.