Survival Strategies for Internet Retailers

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Small, Internet-only retailers better face facts: Multichannel retailers are raiding your customer base and your revenue. If you want to stay in the game, think about how you can maintain and grow your online presence.

Let's look at some factors in the success of multichannel retailers and factors that will continue to attract consumers.

Solid brand presence. The economic slowdown that began in 2000 and continued through 2001 resulted in one of the worst years in a decade for retailers. As consumer spending shrank, online shoppers turned to names they recognized. Sept. 11 reinforced this need for the familiar. We still face uncertain, unsettling times and will continue to seek comfort in familiar brands offline and online. Multichannel retailers can prosper from their established brand presence and translate this to their online offerings.

Established customer relationships. Multichannel retailers can capitalize on customer loyalty and create a synergy that continues the positive relationship online. Catalog companies are a good example of the power of customer relationships. The top four catalog companies have 20 times more transactions per day than the top four online pure-plays.

Convenience. Multichannel retailers simplify the buying process by offering more choices. For instance, if a customer buys from a multichannel retailer and is dissatisfied with the product, he can ship it back or return it in person to the store. The more options retailers can offer, the more customers will feel their needs are being met.

However, negative factors also affect multichannel retailers. For most, e-commerce sales denote just a minor fraction of overall sales. At the recent eTail 2002, some electronic retailing executives indicated that economic factors are forcing them to focus on their bottom line and cut costs where they can save the most money, such as e-commerce.

Given that, what can pure-play retailers do to compete with multichannel retailers? Consider the following:

Build customer loyalty with a relationship-oriented approach. Consumer confidence is shaky, so start building relationships by listening to your customers. Now more than ever, people are responding to the personal touch. Personalizing the shopping experience is a great way to turn them from occasional visitors into loyal friends - as long as you respect their privacy.

Everyone wants to feel important, which is what happens at, where customers receive recommendations for new selections based on past purchases. Community is another important concept, and you can build relationships by creating a sense of community on your site.

Think like a specialty store. Consumers are cost-conscious, but they refuse to compromise on quality. Hence the success of specialty stores such as Pottery Barn, Williams-Sonoma and Bed, Bath and Beyond, which have built solid brands by delivering quality and value to a targeted demographic.

Online retailers can take a cue from these successes by not being all things to all consumers. Identify your core customers and craft your communications directly to them. This can create a powerful effect on the people you need to reach quickly and cost-effectively while eliminating the time and expense of marketing to a range of consumers.

Connect with core values. Sept. 11 caused Americans to reconsider what is truly important in life. For many, focus has reverted from work and financial gain to the values of family, home and personal relationships. To develop an emotional rapport with customers, create an online ambiance that speaks to these values. The Sundance catalog Web site, for example, responds to the need for personal interaction with its Instant Message feature, connecting shoppers with a service rep in real time.

We all have been reminded of the principles that are at the foundation of our economy, such as the neighborhood grocer and the corner drug store, which built their "brands" with customer relationships and superior service. To compete with multichannel retailers, these principles must now become the cornerstone of the small online retailer.


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