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Attention, Online Shoppers:
Retailers are using websites to lure more customers into their stores
Retailers like to think in terms of sales
"channels"--whether they sell only online or also through catalogues and traditional stores.
But American consumers refuse to be corralled quite so neatly. Some like to shop exclusively online or in person. But these days, more of them are taking a mixed approach. Some buy online, but only after studying the catalogue and punching in the product number for a quick getaway; others browse the Web to find what they want at the best price then go to the store to pick up the merchandise.
How to best accommodate these "multichannel shoppers" is one of the more pressing questions for retailers as they sift through their receipts and data on consumer behaviour for the crucial holiday shopping season and make plans for the future. In 2001, amid war and recession, discounters with a strong Web operation fared well as bargain-hungry and increasingly Websavvy shoppers chose to click site to site rather than trudge store to store to compare prices.
But the retailers who did best - and will do so in the year ahead - are the ones who make their online and in-store and catalogue efforts work together. Says Barry Judge, vice president of marketing for Best Buy: "While the Web is becoming more and more significant in terms of direct sales, it's having a far, far greater impact on in-store sales."
In some ways, 2001 was the year e-commerce grew up. Sales growth, a relatively modest
35%, reaching $12.4 billion for the fourth quarter, according to BizRate.com, showed signs of tapering off--one mark of maturity.
Another indicator: you didn't hear nearly so much griping about e-tailers dropping the ball in fulfilling orders. Most were more up-front with customers about product availability and delivery deadlines. And they were more fiscally responsible. No longer willing to lose money on every sale to acquire customers-that's so 1999--many dropped free-shipping offers (though some still offered it for purchases of $100 or more).
More important, 2001 was the year clicks-andbricks retailers learned that e-commerce is not just about how much you can sell online. Wise use of the Web can help make your entire operation more efficient by lowering marketing costs, allowing for more targeted advertising and providing self-help (i.e., cheap) customer service, says Lisa Allen, research director of the retail group at Forrester Research. She adds that "websites can also help generate off-line sales, where, no matter how you cut it, the bulk of retail will continue to be transacted."
Retailers still look at the conversion rates--how many of their website visitors complete a sales transaction--but those numbers are no longer so critical. "Of course we want our site to be profitable," says Sears.com spokeswoman Ann
Woolman, "but it's there to serve as a catalyst for growth for Sears overall." The company reports that 1 out of every 10 in-store majorappliance purchases comes directly from customers who logged on to Sears.com first-representing upwards of $500 million a year in sales.
Sears launched a buy-online-then-pick-up-atthe-store feature last November. A survey found that the main reason customers took advantage of it was the immediate gratification--they got the convenience of online ordering without having to wait for the shipment. Far fewer said they did it to save on shipping costs.
Best Buy also heavily promoted online buying with in-store pickup, and the effort paid off, says marketing boss Judge. More people took advantage of the option in the final week before Christmas, Judge notes, "which allowed us to keep selling as other online orders started to drop off." Holiday traffic to BestBuy.com jumped 30% from the previous year (to more than 1 million visitors a day), and total online sales more than doubled, Judge says. In 2000 about 20% of in-store buyers visited the site first, he says. In 2001 that proportion doubled.

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The Gap used the Web and e-mail more aggressively to advertise sales and deliver coupons, emphasizing that they could be redeemed online or off. Joanne Goodreds, 33, a manager for a financial printer in New York
City has been shopping online for years, and says she noticed that Gap and other e-tailers were much more active in attracting business by sending these alerts. "The e-mails were kind of annoying in their frequency," she says, "but ultimately they were a smart move, because I did end up making sale purchases that I probably would not have otherwise." Sears, too, recently started posting weekly ads online for local store specials.
Wal-Mart, an e-commerce Johnny-come-lately that's now topping the charts, says it has concentrated its energies not on duplicating a
Wal-Mart store online but on finding ways for
Walmart.com to complement the stores. For example, when a customer drops off a roll of film to be developed at the store, he can have the photos posted on the site, then log on to create a Hallmark card with one and frame and ship another--services not offered off-line.
Starting next summer, you'll be able to buy tires at Walmart.com and go to the local store to kick them and have them installed.
Even L.L. Bean, a long-time Web winner, found room for improvement. A feature added to the website lets customers zoom in on a product to view stitching, zippers and other details not visible in the print catalogue. About a third of L.L. Bean's online customers flip through a catalogue, then plug in specific item numbers to initiate a sale - down from two - thirds a couple of years ago. If that trend holds, it could mean lower catalogue-mailing expenses.
Retailers are even more versatile in using the potential of e-commerce. Just look at the tricks of the e-tail trade with which struggling
Amazon gets a boost from partners.
It might have a red-stained balance sheet, grandiose vision and deflated stock price, but
Amazon.com still rules as the world's most popular shopping site. And it has discovered new ways to leverage its online expertise.
Following on its two-year partnership with
Toys "R" Us (the toy retailer handles inventory, marketing and promotion; Amazon runs the website, fulfils orders and receives flat fees plus a cut of all sales), Amazon has in recent months struck similar deals with three other big retailers: Borders, Target and Circuit
City.
Says Lisa Allen, an analyst: "Having multiple revenue streams and a laundry list of partners obligated to cough up money on a regular basis is a huge help to Amazon." How much help?
Amazon reports that the partnerships add tens of millions in quarterly revenue--not bad, although it still won't be enough to make the company profitable in terms of earnings per share, at least not this year, according to a report by Goldman Sachs.
Each deal is different. Amazon runs Borders' website, owns the inventory and ships all orders. Target gets a link to its Web store from the Amazon home page, and pays a flat fee and a percentage of sales in return for the promotion; later this year Amazon plans to start filling orders for Target.com and providing customer service. For Circuit City, Amazon takes orders, letting customers choose whether to have merchandise shipped or to pick it up at a Circuit City store.
Another way to help get the red out: the
"virtual mall." Amazon's storefront operation for small retailers, where it provides server space and order processing in exchange for a commission on sales, hasn't lived up to its potential. "This is where Amazon can really cash in on their brand and leadership position," says Sean Kaldor, vice president of analytical services for NetRatings, an Internet research firm.
Time , Jan 2002