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Internet Retailing Requires Channel Integration

The Internet retailing environment has undergone a dramatic change. Traditional brands have become dominant as more offline retailers develop and enhance their Internet efforts, while the disappearance of online-only retailers continues. This has created a new consumer, one who views the three sales channels — store, catalog and online — not as separate entities, but as access points to a single retail brand.

The challenge this presents to retailers — whether online or store-based with an online presence — is to find ways not only to capture a larger market share, but also to build equity in a single integrated brand.

The solution is integration: integrating sales channels to give consumers choices online and offline to investigate and buy products, as well as integrating marketing channels to reach consumers based on their media consumption preferences.

There are many reasons why retailers today need to appeal to multichannel shoppers. According to a recent study by J.C. Williams Group, Toronto, and Bizrate.com, Los Angeles, consumers who bought both in stores and online spent an average of $600 more in stores than did the store-only shoppers from the same retailer.

That study identified what was dubbed super multichannel shoppers, who were more likely to be customers of all three channels and make online purchases four times more often than the average online shoppers. This group of shoppers also purchased from a retailer's store 70 percent more frequently than the average store customers and 110 percent more often from the retailer's catalog. They also tended to buy more frequently through in-store and catalog purchases. Other findings of interest include:

· Seventy-eight percent of the group identified as online shoppers purchased from both the store and the Internet.

· More than two-thirds of online shoppers look for and buy items online that they previously saw in the same retailer's catalog.

· Seventy-three percent of “store shoppers” preferred to research their purchases online.

· Store shoppers ages 35 to 44 were 24 percent more likely to shop for or purchase items in the store that they had previously seen on a retailer's Web site.

A multichannel approach. Clearly, retailers serious about building market share must target multichannel shoppers. Yet many still fail to grasp the importance of integrating their brand across sales channels and of projecting that integrated brand across marketing channels.

Perhaps the best way to change that is to change the way retailers view their return on investment. Rather than narrowly viewing ROI through traditional metrics such as direct sales, retailers should consider intangible metrics such as brand equity gains, which better demonstrate the role the Internet plays in purchases made in the store or through the catalog.

Consider that 92 percent of respondents in a recent survey by The NPD Group, Port Washington, NY, indicated that they continue to use the Internet to shop and/or buy, demonstrating that even those who are not making purchases online are influenced by a retailer's online presence. In fact, 51 percent of respondents said they shop online and purchase offline, while 40 percent shop and purchase online.

That is why it is critical that retailers support the integration of sales channels through the integration of marketing channels to not only establish integrated brand equity, but also to reach those consumers who use multiple media to gain the information they need to make purchasing decisions.

This is not an entirely new concept. In 1999, a number of dot-coms turned to multichannel marketing as they struggled to pull customers to their Web sites. Barnes & Noble.com distributed 9 million shopping bags in Barnes & Noble retail stores with the tag line “bn.com. Come shop online.” HomeGrocer.com also turned to traditional media, combining television and newspaper advertisements with targeted direct e-mail.

But those early players focused only on getting customers to their Web sites. Today's retailers must develop programs that also drive consumers to catalogs and stores. And those programs must reach as many customers as possible, in the most cost-effective manner as possible.

This is why retailers today need marketing programs designed with integration of media channels in mind. They need campaigns that project a single brand across multiple channels, including television advertising, online ads, direct mail or e-mail marketing.

Hitting home without risk. Today's Internet consumer mixes and matches media consumption, particularly when researching purchasing decisions. As such, retailers who continue to place all their marketing eggs in a single basket are missing the perfect opportunity to reach their target audience in a way that will appeal to them individually, yet cost-effectively.

How do retailers do this? One method that is growing in popularity is the concept of performance-based multichannel marketing, through which marketing and advertising campaigns are created specifically for use across media channels, and each channel supports the other.

For example, the television commercial includes a URL or a toll-free number, allowing viewers to research the product based on their personal preference. That same commercial can soften consumers toward an e-mail marketing message or online ad by heightening their awareness of both retailer and product and vice versa.

And by implementing these marketing campaigns on a pay-per-performance basis, the retailer is able to test messages without the risk. By paying only for successful responses, the retailer can determine which combination of messaging and media works best for their particular audience and product.

Retailers who wish to compete in the new Internet retailing environment must recognize the need to reach their customers and potential customers in a manner that suits their individual preferences. Internet advertising on its own is an ineffective branding tool, particularly if the brand is that of integrated sales channels.

Rather, a multichannel approach taking full advantage of the new online consumer's fondness for mixing and matching information and purchasing sources is the best way to go. And if that approach is handled under a performance-based model, everyone comes out a winner.

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