Retailers Discuss Online ROI Opportunities

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NEW YORK -- Best Buy Co. finds inserts, search engine placements and affiliate relationships offer the best return on investment for marketing its online store, attendees were told yesterday at the National Retail Federation's Shop.org annual summit here.


For 1-800-Flowers.com, affiliate marketing is the biggest ROI generator, while investment in customer relationship management systems does the magic for outsourced e-commerce provider GSI Commerce.


"There is no ROI on brand advertising," Chris McCann, president of 1-800-Flowers.com, told a roomful of e-commerce executives from most major retailers nationwide.


When asked, GSI chairman/CEO Michael Rubin said his favorite metric was customer satisfaction. The King of Prussia, PA, firm runs hourly surveys to gauge customer feedback on sites for Palm, Nick.com, Reebok and The Sports Authority, among the 50 that it hosts for the brands.


Scott Bauhofer, senior vice president and general manager of Best Buy's online stores, said customer satisfaction was one of two metrics essential to him. The other was site graphics, which led to conversions in sales through increased traffic online and in Best Buy stores.


A longtime direct marketer like McCann also relied on customer satisfaction feedback. But retention frequency mattered equally.


"How many customers are coming back?" McCann said.


Moderated by Forrester Research consumer markets research director Kate Delhagen, the panelists explained what worked last year and gave expectations for next.


"Online is becoming a more and more important marketing channel," Bauhofer said.


The Minneapolis-based electronics chain relies heavily on Sunday inserts and television to propel business to its 700 stores nationwide. But its customers clearly are doing multichannel shopping as well. The site at www.bestbuy.com already reports sales larger than any single store in the chain.


An estimated one out of two consumers who visit BestBuy.com uses it for research. But the retailer still endeavors to get more people online. So it is using Web kiosks in stores with the same BestBuy.com site as well as associates to educate customers uncomfortable with shopping online.


McCann of 1-800-Flowers, Westbury, NY, encourages his call center staff to invite people to opt in to online promotions.


"[But] trying to incentivize people for e-mail campaigns did not work," he said.


Online stores run by GSI, on the other hand, are agnostic about the channels.


But even as all panelists agreed that multichannel was the way to go, they saw imminent threats. Worries included spam and Internet taxation as well as unforeseen events like Web-transported viruses that play havoc with systems.


"The biggest one facing all of us is spam," McCann said.


Interruption is another pothole in the road ahead. The recent blackout had little effect on sales or operations. But companies cannot afford to do what Wal-Mart Stores Inc. did awhile back: shut down the site for a month to relaunch a better Walmart.com.


"Fifty percent of those who visit us online [do] research," Bauhofer said. "To not have that available could significantly impact on store sales."


Best Buy's solution when doing a relaunch of its site was devising a browse-only site, while it changed site plumbing behind the scenes.


In the end, it all ties back to combining strengths of the various channels to push one of choice at any given moment.


For example, Best Buy now takes pre-orders in stores for online orders. Forrester's Delhagen noticed the chain is distributing such pre-order forms for new albums by Dave Matthews and Limp Bizkit. This is a test-and-learn effort.


"That's a core strategy across the company," Bauhofer said. "It's less about forecasting, although it does help, but it's more about capturing sales. Get the customers used to it ... the online store gives us a great view. If it sells X on the Web, it'll sell Y in the store. We're developing forecasting models."


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