Howard Lester, Chairman, Williams-Sonoma and Robert Mettler, Chairman & CEO, Macy’s West, discuss multichannel practices as related to their industry.
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Consumers are empowered with a tremendous level of information that they’ve never had before, and most now search the Web before making a significant purchase.
And although the consumer might be in the habit of buying in one of the retailing channels—stores, catalogs, or the Internet—they’re in the mode of shopping in all of the channels.
“Most retailers understand this now and incorporate these other channels as a necessary ingredient of their marketing and merchandising program,” says Kirthi Kalyanam, J.C. Penney Research Professor and Director, E-business Initiatives of the Retail Management Institute at Santa Clara University and widely published in the areas of Internet marketing and retailing. “Most retailers today have dual channels. They either have a store and a Web operation or they have a catalog and a Web operation. Some have three channels. There are opportunities in being a tri-channel retailer, but there are significant challenges.”
On Oct. 2, the Retail Consortium for Management Education met for “Best Practices in Integrated Multi-Channel Retailing,” where Kalyanam and Dale Achabal, L.J. Skaggs Distinguished Professor and Director of the Retail Management Institute at Santa Clara University reported on their research into the best practices of leading retailers that have successfully developed their multi-channel operations to drive greater customer satisfaction, sales growth, and profitability. They were joined by Howard Lester, Executive Chairman, Williams-Sonoma, and Robert Mettler, Chairman and CEO, Macy’s West, in a panel discussion.
“Those retailers that either started with catalog or that had strong catalog and stores certainly have a major competitive advantage in a multi-channel world,” says Achabal. “We’ve been talking with a number of executives whose organizations don’t have catalogs, and they’re certainly concerned. They know that tri-channel trumps dual-channel. Not necessarily financially, but from the consumer’s point of view. The consumer wants more choice.”
Specialized information unique to each channel is readily available, but the key is to be able to leverage that knowledge across channels. Shoppers who transnavigate all three channels significantly influence the multi-channel retailing world we see today.
“We’ve learned that the Internet as a channel is robust in terms of its growth. It’s growing at double-digit rates. Although it’s still a small percent of the overall business, it’s consistently growing. It’s not a flash in the pan,” says Kalyanam.
Certain products are well-suited for online retailing: products that have very standard characteristics and are easily describable typically sell well. Examples include computer hardware and software, travel services, and books. Categories such as apparel are not as successful: they are very subjective, with many variations of texture, fabric, color, and patterns that are difficult to describe.
RCME participants sitting in on the program “Best Practices in Integrated Multi-Channel Retailing”
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“Where is multi-channel retailing most effective? We’d argue that it works especially well in fragmented markets, where there are fewer large, dominant chains. So you have an opportunity to enter the market and be successful by achieving scale . Secondly, it works well with products that have standardized or easily communicated sets of attributes and at the same time are branded. The third factor is highly perishable, centralized inventory,” says Achabal. “These critical success factors are very useful in selecting the piece of your assortment that you want to take online, from a productivity point of view, and to benchmark performance.”
Store-based companies operating in the traditional way never thought about gathering information or building a data base on their customers, says Lester of Williams-Sonoma.
“It’s a different way to think about the business. Today, it’s a huge advantage to have started direct. It’s very difficult, if you grew up in a store environment, to make the move to (having) a formidable part of your business being direct. Very few people have done that.”
“I don’t think store-based retailers have really understood marketing well. I think they were into merchandising and advertising—they were in the sales business. This is all about marketing and it’s all about surrounding the customer with all of these things that have a certain cost and a certain return. And trying to measure how you put all these together in the most optimal way, to define your brand and get out in front of the pack.” n
"The leader of the business has to understand where the future is going and direct the interface and leverage both the technology and the channel itself to make sure it works for the consumer. Otherwise, it's just never going to happen."
Robert Mettler, Chairman and CEO, Macy's West,
in a panel discussion.
Learn more about RCME
Retail Consortium for Management Education
The Retail Consortium for Management Education (RCME), sponsored by
Santa Clara University's Retail Management Institute, provides powerful seminars that get to the heart of current leadership and management
challenges facing the retail industry.
Members of your company's leadership team can gain the insights,
competencies and skills necessary to thrive in today's fast-paced,
constantly changing business world.
For Information on future RCME
programs and membership contact:
Cynthia Gamage at 408.554-4961 or
e-mail: cgamage@scu.edu
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