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-commercelandscape has changed from its “Pure Play Is King” days. The next three companies in our “Look Who’s MakingMoney 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’sperspective, and not just from their own channel bias, will be successful inthe long run,” Andersen managing partner Joe O’Leary told the E-Commerce Times. “The customer determines how they’re going to interact withyour organization — let the customer decide what channel they want to use.”

VictoriasSecret.com

VictoriasSecret.com made Internet marketing history with its first livestreaming 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 beenenhancing its own online identity by building strong, personalizedcustomer 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 eachother 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’Learysaid, companies must integrate their customer and inventory information acrossall 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 andthat rep will know what I’ve been doing on the Web and give me personalizedproduct 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 fourthquarter of 2000.

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

“Every time they suggest something I buy and I like it, they increase theswitching costs,” O’Leary said. “I’m not likely to go to the competition if [EddieBaruer.com] makesproduct offerings that are so tailored to me they appear to be apersonalized service.”

Cheap Tickets

One of the strongest value propositions the Web brings consumers is instantprice comparisons. As a result, many brick-and-clicks suffer from one primarydisadvantage: Customers can go to the brick to try the product, then hit theWeb 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 theplace to go to find the lowest prices, travel brokers generally make a profitfrom the transaction with the airline or hotel. These business models also benefit the airlines and hotels byhelping 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 yeargrew 78 percent in 2000 over the previous year, reflecting $255.4 million ingross bookings. Gross bookings through Cheap Tickets’ Website are now growing faster than through any of the company’s otherdistribution 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 andproactively leverage the relationship,” O’Leary said.

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