Getting Brick and Click Together

'Tis the season for integration. Brick-and-click integration, that is.

Experts did not really predict it to happen quite this soon, and consumers did not seem willing to cooperate immediately, but all indications are that the various shopping channels are finally beginning to integrate.

Catalog users are leaning more heavily toward online shopping. Web retailers are beginning to understand the necessity of having a "real world" presence.

And the public is increasingly flexibile about where it is willing to shop.

Room to Grow

A new report from Goldman Sachs, Harris Interactive and Nielsen//NetRatings offers the encouraging news that consumer online spending has increased 34 percent since the beginning of November.

According to other analysts, consumers will spend US$10.25 billion online in this fourth quarter, up 12 percent from one year ago.

In contrast, the word from brick-and-mortar retailers is that holiday business is down when compared to this time last year. Online merchants, while not necessarily maintaining that peak in revenues seen just after Thanksgiving, are definitely making a strong showing this holiday season.

What It Means

All of the data adds up to the fact that American consumers are starting to make the online shopping channel part of their lives.

Mainstream retail operations are reporting surprisingly strong online sales. Williams-Sonoma, for example, reports its online sales are three times higher than a year ago.

Why? According to Bob Pittman, who recently was tapped to become the sole chief operating officer of AOL Time Warner (NYSE: AOL), it is because Internet access has reached a "critical mass," with two-thirds of American homes now online.

Speaking at a recent industry conference, Pittman said that "the Internet revolution is in full force," and that despite a sluggish economy, online shopping is steady.

Still Just a Bit

Still, e-tail sales continue to make up just under 1 percent of total retail sales, based on figures from the U.S. Department of Commerce.

The key to pumping up that figure could be more aggressive attempts at integrating all channels, a process that is moving at a snail's pace.

For example, a survey conducted by The E-Tailing Group, a Chicago-based Internet strategies consulting firm, revealed only 12 percent of e-tail sites allow consumers to pick up their purchases at brick-and-mortar locations.

On the plus side, 65 percent of the sites surveyed do offer Internet buyers the opportunity to return merchandise at stores, instead of through the mail or shipping companies.

Maximizing Resources

In addition to making things easier for the consumer, merchants could benefit from more aggressive integration by using their already high-traffic offline operations to drive consumers online.

So far, although retailers are willing to publish the address of their Web site in ads and on shopping bags, they rarely feature Web promotions that would aggressively drive consumers to the site.

Additionally, those brick-and-click retailers that do manage to encourage shoppers to sign on could make the consumers feel more comfortable if the Web site looked more like the store. Familiarity helps.

The E-Tailing Group suggests retailers should promote features that the Web site offers that other channels, such as mail-order catalogs, cannot offer. For example, why not play up the advantages of online real-time inventory and instant checking of order status? Most Web sites now have these capabilities.

Old Economy Thinking

It appears a number of retailers are still hesitant to over-promote their Web sites, fearing they might kill the cash cow that fuels the rest of the machine.

That probably stems from a traditional self-contained profit-center mindset. Perhaps if their channels were more effectively integrated, retailers might capture a greater market share and generate increases in all profit centers.

Companies that have taken this type of approach are already seeing results. Lands' End (NYSE: LE), for example, a company that has done an above-average job in integrating its channels, reports that nearly 20 percent of its sales now come from the Internet.

Lands' End may emerge as one of the poster children for successful online selling, and its achievements will likely be the result of the power of integration.

What do you think? Let's talk about it.