E-BUSINESS SPECIAL REPORT
Creating E-Tail Sales from Thin Air

Such retailers must compete not only with each other, but also with their own online arms. Therefore, they must employ an array of tactics to prevent cannibalization.

Although many brick-and-click companies strive to find the middle ground, some definitely do it better than others, and according to a few analysts, some need not do it at all.

A Nonissue?

Fortunately, since e-tailers have been trying to combine offline and online efforts for a few years now, they seem to have learned some important lessons.

Paul Ritter, program manager of Internet business strategies at the Yankee Group, told the E-Commerce Times, "The balancing act of managing online sales initiatives in a way that won't cannibalize brick-and-mortar sales has become much less of an issue in the past 12 months."

This has occurred for two reasons, according to Ritter. First, companies that initially set up an e-commerce initiative as a separate company have seen the error of their ways and have restructured to promote integration.

In addition, Ritter said, "There is now a much greater awareness of synergy that can be harnessed from operating a completely seamless multichannel selling operation, where the positioning, branding , marketing and incentive structures are similar across all channels."

Different Aims, Same Group

Although an integrated marketing effort can boost sales in both online and in-store channels, e-tailers are finding that shoppers approach each channel differently.

"A number of retailers have been successful identifying the specific categories and subcategories, even the SKUs, that consumers want to buy online versus offline," Boston Consulting Group manager Simon Stephenson told the E-Commerce Times.

For example, he said, most consumers prefer to buy clothes in a brick-and-mortar store, where the ability to feel and try on merchandise is important. However, those same consumers will happily buy replacement shoes or staples like socks and underwear online.

One e-tailer found that a particular type of boot sold very well online long after it had been rotated out of the store, so the item was featured heavily online but was not restocked in the store.

"Part of the recipe for success is constant trial of different categories or assortments, and systematic testing of results to see what really works," Stephenson noted.

Mixing It Up

Taking advantage of multiple channels, rather than viewing them as competitive with each other, is another tactic that has helped many e-tailers achieve success.

In particular, allowing online shoppers to return items to a brick-and-mortar store has proven to be a popular option. Customers also seem to appreciate online promotions that offer a discount that can be redeemed at store cash registers.

"Retailers that are successful at multichannel retail are deploying online features that address the primary reasons shoppers move from Web site to the store," Jim Crawford, an analyst at Forrester Research, told the E-Commerce Times. "Those [include] wanting to see the product or talk to a salesperson, needing the product right away, or not wanting to pay shipping costs."

Crawford added that the practice of allowing online shoppers to research a product, such as an appliance, then pick up the item in a store has been very successful.

Star Examples

As in any business, some companies acquit themselves better than others.

Ritter cited Lands' End (NYSE: LE) , Eddie Bauer, Best Buy (NYSE: BBY) , Circuit City (NYSE: CC) , The Sharper Image (Nasdaq: SHRP) and J.C. Penney as shining examples of retailers that present a unified and cohesive image to customers, regardless of the channel in which people shop.

"Each of these firms does an excellent job of capturing the synergies among all their sales channels," Ritter noted.

In doing so, he added, they drive down customer acquisition costs, improve customer retention rates, and increase the amount of revenue received from shoppers who buy through multiple channels.

"Making improvements on those three critical metrics is what every retailer strives for, but [it] ends up keeping the majority of them up at night," he said.