CHANNEL XING

Jul 01, 2003 9:30 PM  By

The time: Four years ago. The familiar opening theme to that TV chestnut, “Mission: Impossible,” is heard, as our hero pushes the “play” button on a tiny cassette recorder. A no-nonsense voice emerges.

“Good morning, Mr. O’Hern. Ritz Camera — a privately held, 1,300-store photo supplies and equipment chain — is about as traditional as a retailer can be. It has no call center, no real catalog business, and a homegrown Web site that offers little more than billboard-style advertising for the company. Orders that come in online have to be printed and then keyed into the system. Your assignment, should you decide to accept it: Add an e-commerce channel.”

Impossible? Maybe not. But the task given Bob O’Hern four years ago seemed daunting. O’Hern, the vice president of information systems for Beltsville, MD-based Ritz — which operates some 1,200 camera stores and 115 Boaters World marine supply stores — recalls that although just adding the channel would have been difficult enough, that was only the beginning of the process. “You know those checklists of the 10 or 15 things you have to do when you add a channel, like integrating the back end or being able to make sure inventory is available?” asks O’Hern. “Of course, you need to do all those. But you also need to keep doing all those things. You can’t just set it up and leave it at that. You have to continue to have those capabilities.”

Which is just one part of the overall strategy when retailers add another channel, whether it’s a traditional company expanding into the e-commerce and catalog businesses or the latter group opening mall or strip center stores. It’s not enough to recognize the technical and logistical aspects in the process (i.e., hiring employees, looking for real estate, or beefing up the warehouse management system). Rather, it’s realizing that adding any kind of channel requires an overall strategy that includes a long-term view of the company’s needs, as well as understanding how the new channel will increase brand awareness and customer loyalty. Finally, the strategy must take into account how to add technology to make sure all of these elements work as planned.

“What comes to mind initially, “says Gene Forte, CEO of Cincinnati’s Forte Industries, which assesses, designs, and builds supply chain and logistical facilities, “is to focus on the distribution and logistical part of the supply chain. Companies need to look at how they’re going to fill orders, and how they’re going to fill them in the most cost-efficient and customer-service oriented fashion.”

MORE CHANNEL CHALLENGES

It’s complicated and difficult enough to service one channel — warehouses, employees, software, merchandise, equipment, trucks, and the like. But what happens when the decision is made to add another channel?

“It was tough,” says Noel Nelson, director of direct sales for REI, the 66-store, outdoor gear retailer with traditional, catalog, and Internet channels. “We had a leg up because we had catalog sales when we added the Internet channel. But that didn’t mean it was easy.”

Once the decision is made to add the channel, several important questions must be answered. There aren’t necessarily any right or wrong answers, say consultants. Rather, the answers depend on what the company wants to accomplish with the new channel:

  • One or two?

    Should expanding companies duplicate existing processes for inventory, distribution, and the warehouse to accommodate the new channel, or should the new channel’s requirements be folded into the existing system? Says Bob Stetzel, director of development for South Deerfield, MA-based Yankee Candle Company, which manufactures, distributes, and sells candles through retail and direct channels, “What are you going to do every time the call center hires two new clerks? Are you going to have to integrate their work into the entire system, or is it OK to have systems with redundant information? What’s your level of comfort?”

  • Be flexible

    Plans made ahead of time must be adaptable to new conditions. Ritz didn’t plan to add a call center when it launched its expanded Web site, but there’s one today. The company learned quickly, says O’Hern, that its customers sometimes needed to talk to someone who could answer sales-related questions. Today, the channel that wasn’t going to exist accounts for what O’Hern calls a significant part of Ritz’s direct sales, primarily through cross-selling and upselling.

  • Mine the data

    It’s not enough to gather the information from the new channels. Companies should devise ways to use it to increase customer loyalty and customer satisfaction, says Tom Madigan, industries vice president for Oracle Corporation of Redwood Shores, CA. “What’s sometimes difficult about that,” he says, “is that you’re dealing with a company that may have three different SKUs for the same item — one for retail, one for catalog, one for the Web. So before they can do anything else, they have to have one SKU across all three channels.”

  • Be committed

    “Too often,” says Donny Askin, the CEO of Natick, MA-based CommercialWare, which provides software to manage supply chain considerations from back office to warehouse and which helped Ritz develop its Web component, “it’s a constant challenge to maintain a commitment to the new channel. Sometimes it’s a matter of capital. Sometimes, it’s a matter of being scared to enter a new arena. Sometimes, it’s getting caught up in the hype and hyperbole. But that commitment should start at the top, and it should be constant.”

  • Have a vision

    Where does the company want to go with the new channel? What is it there for? It’s not enough to add a channel just to move product, say the experts. Instead, companies should ask how adding that channel will make it better at what it does; or how it will help acquire and retain customers.

“Regardless of what you choose, you need to choose best practices,” says Askin. “You can do it with duct tape, but the way you really want to do it is to keep your systems tight and integrated across all of your channels.”

THE EXECUTION’S STRONG

Yet, even keeping all of that in mind, execution is still critical, and it’s an ongoing process. This may sound obvious, say those who have done it, but it’s no less important for that.

“If you don’t execute seamlessly, you’re going to have shoppers going elsewhere,” says Askin, whose company advocates this seamless approach and designed many of its services around it. “Consumers need to be able to use your channels anytime and anywhere they want. They want to be able to cross channels, and you need to be able to use that need to leverage multiple channels.”

That was much the approach adopted by REI when it added its Web channel several years ago. The goal, says Nelson, was a seamless experience across each of REI’s channels. “We didn’t want any barriers for consumers,” he explains. “We wanted them to be able to do everything everywhere, so that if they bought something online they could return it at a store.”

But that was far from the only advantage. A so-called seamless philosophy allowed for a host of customer and company benefits, ranging from address hygiene — no more sending three catalogs to the same person because they’ve purchased products from three different channels — to allowing cross-selling and upselling to retail customers who use the call center or Web site. What many retailers don’t take enough account of, says Nelson, is how customers move across channels. Adding a Web presence doesn’t mean all Web customers will be new. They could be retail customers (accustomed to more and better service) who are going online for convenience.

“Not all online shoppers are savvy,” says Nelson. “You’re going to get shoppers for whom this is a first online experience, and if you don’t do a good job, it might be the only time they shop online with you.”

One example: When a customer buys a tent in an REI store, and later discovers that he or she forgot to buy a needed accessory, the customer can call in, have the customer service rep check the retail order and ship the necessary product based on that exact order. There is no need to extensively question the customer, who may not remember exactly what he or she bought anyway.

This process meant REI needed one database that could handle every channel, as well as software that allows every customer service rep to view the company’s Web site in the exact same way that consumers see it. The idea is to make the customer experience both as pleasant and as similar as possible, regardless of what channel the customer uses.

LOOK, MA — NO SEAMS

That uniform experience is something that Ritz also has spent a lot of time, money, and effort in developing. In this case, the seamless approach applies to pricing. The company wants to make sure that a camera that costs $50 in-store is also $50 online and $50 in the catalog. So, at Ritz, there was little discussion about redundancies. Since Ritz started from scratch (something which may have been an advantage), it was able to integrate the new channels without worrying about duplicating effort. Today, that means Ritz has an integrated back end, can access inventory status in real time, and can use e-mail for shipping notices.

And the system is robust enough across its components to allow the company to expand its cross-channel services — something that was part of the original planning. A new program, called Ritzpix.com, makes it possible for customers to download digital images to the company, which then transmits them to specific retail stores. There the images are printed, and friends or relatives can pick them up. This saves the customer from trying to e-mail images on balky modems, or printing them at home on expensive photo paper and then mailing them. Ritz, says O’Hern, is convinced this might be the next huge untapped market in its industry.

It’s an especially impressive achievement, given how far Ritz had to go four years ago. But adding and integrating new channels is certainly not something that Ritz alone has done. Indeed, it’s something all retailers should be capable of doing.

“So many times, companies have a disjointed approach to adding channels,” says Forte. “And that can be a problem, because they aren’t able to capitalize on opportunities right away. Retailers should identify a new channel, and bring in expert counsel who can help them identify not only where they want to go, but Phase One, Phase Two, and Phase Three in getting there. That way, they can get their solution in a synchronous manner.”

And satisfy their customers at the same time.

Jeff Siegel’s articles have appeared in Forbes, American Way, Emerging Business, and a variety of other consumer and trade magazines. He lives in Dallas.