It’s about that time of year when we see all the predictions and forecasts of how much online sales will increase, by product, for this holiday season. From cautiously to wildly optimistic, these forecasts are things that e-commerce managers’ dreams are made of.
There’s something missing in this year’s forecasts, though, and the inflated performance everyone expects from online sales this season needs a reality check. Don’t expect any corrections to these forecasts, however, because the catalysts driving the change in how consumers buy don’t appear to be driving how these forecasts get created.
Black Friday sent a subtle warning that multichannel selling strategies will get rewarded big time this holiday season. While multichannel selling has been the mantra many companies have attempted to follow for years, this year’s online shopping season is shaping up to be the proof point that having a coordinated selling strategy pays off.
Coordinating Multiple Channels
I think it’s important to look at the underlying dynamic that is changing selling online. It’s that trust is turning into speed of purchasing this holiday season, and while any e-commerce manager could pile up their weight in metrics and key performance indicators, it’s irrelevant unless the last 12 months have been spent attuning all channel strategies to the unmet needs and wants of customers.
Coordinating multiple channels to have the same pricing, availability, product selection and messaging is very difficult, yet this holiday season will be the first one in which companies with these multichannel strategies in place win big relative to online-only counterparts. Here are the reasons why:
- It’s payback time for retailers who have cultivated customer loyalty by working hard to have the right products in stock at the right time, at the right price. Apparel and footwear have consistently been those areas of retailing that generate the highest levels of loyalty, and it all hinges on having the right product, at the right price, at the right location for the customer.
Over years of purchasing experiences, customers trust retailers to deliver from their Web sites what they have in the stores — and this segment of customers I think will lead the significant uptick in online sales this holiday season. I’ve seen friends who have rarely shopped online go to Target.com or Nordstrom.com and order children’s clothing because they didn’t want to hassle with the holiday shopping lines. These are people who have never shopped online before.
It’s also interesting to note that several shopping studies have shown that the way the most elusive shopping segment of all — 25-34 year olds — perceive colors, versus the way an aging baby boomer does, is quite different. Again, the trust issue of apparel purchased online unites these very different segments: colors seen in a store that could once be trusted, can’t be verified online.
- Multichannel selling requires outstanding supply chain synchronization and visibility. Getting the right products, at the right price, to the stores is what supply chain synchronization is all about. It’s not enough in a multichannel world to simply have a supply chain system that can manage inbound shipments and scheduling. Multichannel retailing requires visibility, forecasting support and orders of magnitude, and more synchronization across multiple distribution centers whether they are located across the country or across the world.
- Pricing gets played when multichannel selling strategies aren’t in place. Consumers and companies purchasing through multiple channels both know that when a company’s pricing systems aren’t consistent between channels, extreme price deals can be had.
Expedia’s relationships with airlines at times bears this out, as certain European airlines have at times put in the wrong pricing for their online partners and given away US$15 tickets from Detroit to Berlin for example.
Having a single system of record for all pricing across all channels, and synchronizing on that system when revised costing cycles occur, is critical. This is why multichannel retailers aren’t going to get played on price, yet will emerge from this holiday season with stable gross margin performance for the period.
- Product range is the equalizer. By far the most critical driver for online retailing traffic is product range, and the multichannel efforts of Costco.com and WalMart.com bare this out. There are items on both Web sites that aren’t available in their stores, and this is a deliberate strategy to show that they can scale to the level of online-only retailers’ product breadth.
Virtual catalogs are tough to compete against, and this holiday shopping season, electronics, photography equipment and other products differentiated on price will represent the bulk of spending with online retailers — in fact, it’s clear this is happening already.
- A service-oriented attitude is a must. Multichannel retailers who have been fortunate enough to create loyalty with customers are finding that the perception of service also applies to their online selling as well.
This “halo effect” of service applies to Nordstrom, a premium department store headquartered in the Pacific Northwest with stores located throughout the Western U.S. Their loyalty with shoe customers is so strong, they have a shoe configurator on their site that gathers much of their traffic. That’s trust. When customers feel comfortable ordering a configure-to-order shoe via the Web, the trust factor is alive and well because Nordstrom’s service halo effect reaches online.
Wrapping It Up
Taking all these factors into account, it’s clear that multichannel-based retailers are in for a strong holiday selling season, and the online-only retailers will be challenged. Tying this all back to the forecasts of online commerce, it’s important to realize just how much hard work is needed on the part of both multichannel retailers and online retailers to make those forecasts a reality.
When no customer is left behind in channel strategies, the forecasts appear more real, but not until then.
Louis Columbus, a CRM Buyer columnist, is a former senior analyst with AMR Research. He has worked with enterprise clients on defining solutions to their channel management, order management and service lifecycle management strategies. Mr. Columbus also teaches graduate-level international business and marketing courses at Webster-Loyola Marymount University and University of California, Irvine. He is the author of fifteen books on technology and two books on analyst relations. His book, Getting Results from your Analyst Relations Strategies, can be downloaded for free.
This story was originally published on Dec. 8, 2006, and is brought to you today as part of our Best of ECT News series.