Multichannel Retailing Fails to Deliver on Promises

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For all the hoopla surrounding multichannel retailing, few in the industry would disagree that significant hurdles remain before consumers are satisfied with the multichannel experience. Many would even argue that multichannel retailing is not truly here yet.


"No one has done a great job at this point of having a totally seamless process of going from one channel to another without any aggravation," said Britt Beemer, chairman/founder of America's Research Group. The Charleston, SC, marketing firm interviews up to 15,000 consumers weekly on behalf of its clients.


Instead of multichannel retailing delivering much-promised customer loyalty, there are signs that consumers are increasingly frustrated with the shopping experience. Overall customer satisfaction experienced its second-greatest drop since 1997 during the first quarter of 2005, according to the American Consumer Satisfaction Index released last week by Ross School of Business at the University of Michigan.


The 0.8 percent decline follows a 1-percentage point drop that occurred in fourth-quarter 2004. The ACSI is a national survey of customers who rank their experiences with companies across 41 industries, including retail.


Part of the problem is that merchants, sensing a marketing opportunity, promise multichannel capabilities to consumers before they've worked out the logistics, said Debra Ellis, president of direct marketing consultancy Wilson & Ellis Consulting, Barnardsville, NC.


Ellis defined true multichannel retailing as the ability to buy product from any source, return it via any source and inquire about it using any source.


During the most recent holiday season Best Buy and Circuit City let shoppers order products online and pick them up in a store. But when those who took advantage of the offer arrived at the stores, it was unclear where they were supposed to pick up their purchases. Also, the lines for orders placed online often were longer than for in-store purchases.


"Some of those customers said they would never go back to Circuit City and Best Buy," Beemer said.


No one has developed the technology to handle the logistics of multichannel retailing adequately, making it difficult for merchants to integrate their operations, Ellis said.


"The companies that will be successful in the future will be the ones that get their back end in place before they start their marketing," she said. Once true integration occurs across multiple channels, "the sky's the limit."


Meanwhile, it "is a long road" filled with "snafus and inconsistencies and expectations that aren't being met," said Kelly Mooney, president of interactive marketing company Resource Interactive, Columbus, OH.


One way that merchants are trying to work out the kinks in multichannel retailing is by letting consumers return merchandise purchased online at any store. This spring, Talbots started to offer Web shoppers the ability to learn in which stores individual items are available, then reserve the items they want to try on.


"Apparel shoppers have been waiting for something like this," Mooney said.


Though the strategy resembles what Best Buy and Circuit City did, Talbots' roots in catalogs, and thus fulfillment, could give it an advantage.


Catalogers have been better multichannel merchants than brick-and-mortar retailers, said Larry Freed, president/CEO of ForeSee Results, Ann Arbor, MI, which measures online customer satisfaction.


"Generally, catalogs that go online have much better success online than traditional retailers," he said, because the catalog and Web site models are similar.


Where catalogers have had a tougher time is in retail, despite notable exceptions such as Cabela's and Coldwater Creek. These companies have used their catalogs and direct mail to drive shoppers to new stores when they open.


However, catalogers' retail handicap may take a turn for the better. Epicenter is a company launching this week at the Annual Catalog Conference in Orlando, FL. It envisions bringing together about 60 direct brands under one roof inside malls nationwide.


"To be multichannel, you really need stores, yet so many direct merchants don't have stores because they are put off by the strictures -- the liabilities, the capital and the difficulties involved in opening regular stores," said Tony Lee, president/CEO of Epicenter Holdings Inc., Greenwich, CT.


The company is owned by Gordon Group, a shopping center development firm that was responsible for the Shops at Mohegan Sun in Connecticut, among other centers.


Epicenter plans to lease or buy the anchor locations left vacant by exiting department stores and create 150,000-square-feet to 200,000-square-feet centers. The goal is to open about 100 centers in highly trafficked malls in a few years. The first location is to be announced soon and open next year.


The company also developed a handheld scanning device that shoppers may pick up at the entrance if they wish. Shoppers could scan an item and see all the information about it that appears on the merchant's Web site as well as buy it and have it delivered to their homes. As a result, consumers get "this much-vaunted convergence," Lee said.


Merchants also will be able to show a broader range of merchandise in a smaller space without having to carry as much stock.


Epicenter also tries to deal with the logistics issue by offering a POS system that interfaces with catalogers' operations, Lee said.


"Every transaction goes directly to the merchant's back-end systems," Lee said.


On the other hand, catalogers' online advantage is threatened as traditional retailers get more Internet savvy. Though it hasn't been confirmed, industry experts have said that Forth & Towne -- Gap's new retail brand for baby boomer women set to launch this fall -- and American Eagle Outfitters' unnamed new retail brand both will launch with companion Web sites.


"It smells like a great strategy: starting from ground zero with an integrated strategy," Freed said.


The same experts have said that both brands are considering in-store kiosks where store associates or shoppers can order out-of-stock items from the companion Web site.


"There's a huge opportunity to make the Web a bigger component within the store, and I don't think retailers are taking advantage of that," Freed said.


Chantal Todé covers catalog and retail news and BTB marketing for DM News and DM News.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters


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