Special Report: Look Who's Making Money Online, Part II

When the Andersen professional services firm recently surveyed e-commerce customers, nearly half said that e-tailers who also sell from a physical location provide better customer service. More than three-quarters of respondents said they have had both online and offline contact with e-tailers.

These findings are a reminder of how much the e-commerce landscape has changed from its "Pure Play Is King" days. The next three companies in our "Look Who's Making Money Online" series excel at the fundamentals of the latest phase in e-commerce: multichannel retailing with an emphasis on personalized customer service.

"Companies that understand they have to view interactions from a customer's perspective, and not just from their own channel bias, will be successful in the long run," Andersen managing partner Joe O'Leary told the E-Commerce Times. "The customer determines how they're going to interact with your organization -- let the customer decide what channel they want to use."

VictoriasSecret.com

VictoriasSecret.com made Internet marketing history with its first live streaming media fashion show, which logged over 10 million visitors and 500 million hits in 10 weeks back in 1999.

Since then, the sexy daughter of parent company Intimate Brands (NYSE: IBI) has been enhancing its own online identity by building strong, personalized customer relationships that help drive consumers to Victoria's Secret retail stores.

"They've been extremely successful in integrating their various channels -- catalog, customer care, Web site, brick," O'Leary said. "All the channels complement each other effectively. Their objective is to drive profits for Victoria's Secret, not necessarily to optimize any one channel."

By integrating product data on purchasing demographics and inventory with customer data tracking individual purchasing histories, O'Leary said, VictoriasSecret.com excels at upselling and increasing the average value of its customer transactions.

The strategy seems to be working. VictoriasSecret.com said it was profitable as a separate online entity in 2000, helping to boost the overall picture for Intimate Brands.

EddieBauer.com

In order for e-tailers to thrive in the new e-commerce environment, O'Leary said, companies must integrate their customer and inventory information across all channels and view every customer interaction as an opportunity to learn. This is where EddieBauer.com excels.

"If I order from EddieBauer.com, I can talk to a rep on their Web site and that rep will know what I've been doing on the Web and give me personalized product information," O'Leary said. "That requires integration from a data perspective."

EddieBauer.com said it made a profit in online sales in 2000 and that it expects the same for 2001 as well. The company experienced a 120-percent lift in e-commerce sales during the fourth quarter of 2000.

EddieBauer.com's enhanced customer relationships also help prevent consumers from switching to another e-tailer for their clothing needs.

"Every time they suggest something I buy and I like it, they increase the switching costs," O'Leary said. "I'm not likely to go to the competition if [EddieBaruer.com] makes product offerings that are so tailored to me they appear to be a personalized service."

Cheap Tickets

One of the strongest value propositions the Web brings consumers is instant price comparisons. As a result, many brick-and-clicks suffer from one primary disadvantage: Customers can go to the brick to try the product, then hit the Web to buy it somewhere else at a cheaper price.

Online airline and hotel reservation sites are relatively immune from such problems, even if they are a brick-and-click such as Cheap Tickets. By serving as the place to go to find the lowest prices, travel brokers generally make a profit from the transaction with the airline or hotel. These business models also benefit the airlines and hotels by helping them cut their losses on excess inventory.

For the fiscal year ending in December, Cheap Tickets posted earnings per share of 51 cents. The company's Internet bookings for the year grew 78 percent in 2000 over the previous year, reflecting $255.4 million in gross bookings. Gross bookings through Cheap Tickets' Web site are now growing faster than through any of the company's other distribution channels, the company said.

The sticking point for travel ticket sites such as Cheap Tickets is that they have to continue to prevent customers from visiting competing travel brokers. According to O'Leary, travel sites will need to begin following the same models used by the Eddie Bauers and Victoria's Secrets of the Web.

"They need to learn about their customers from every transaction and proactively leverage the relationship," O'Leary said.