Multichannel Retailers Have Loyalty Edge

Originally considered a threat to traditional retailers, Internet pure plays took the early advantage with their ability to quickly adopt new technology offering consumers immediacy and interactivity. But multichannel retailers, defined as those that derive a significant percentage of revenue from multiple shopping channels, appear poised to win the customer loyalty war.

Take Eddie Bauer. This classic “brick, click and flip,” which lets customers shop from physical stores, Web sites and catalogs, claims that its multichannel shoppers spend more and have greater loyalty characteristics than its single-channel shoppers do.

A recent study by Jupiter Research, New York, confirms this finding: Multichannel shoppers, it found, spend 30 percent more than their single-channel counterparts.

Good news, right? It’s a start. Gaining greater customer loyalty demands more than adding another channel to push product. It requires an understanding of customer behavior and the ability to recognize and reward the best customers for their loyalty regardless of when, where or how they shop.

This is where most multichannel retailers still have upside potential. The Jupiter study found that 76 percent of retailers are unable to track customer behavior across all channels.

Already established and skilled in the ways of consumer retail, multichannel retailers are armed to succeed where the majority of Internet pure plays struggle:

• Brand awareness and image. For years, big brand retailers such as Eddie Bauer and Sears have instilled an image of who they are and what they stand for. It’s an obvious advantage over dot-coms that must build consumer awareness and confidence from scratch.

• Existing customer databases. Most multichannel retailers have been building their customer databases for years. Though holes still exist, they are less likely to be mentally consumed by acquisition and more likely to be cognizant of customer retention and loyalty. Most dot-coms are still in hot pursuit of first-time visitors.

• Existing merchandising skills. Multichannel retailers know how to present and merchandise goods in an exciting way. They have efficient fulfillment systems and delivery processes in place. They understand inventory management, markdowns and cross-merchandising. And they long ago invested in systems and processes to improve their back-office logistical and accounting functions.

• Customer-service savvy. Multichannel retailers are generally skilled in customer service. Plus, multiple channels mean multiple locations to handle customer service, deliveries, returns, information gathering and cross-sells.

In addition to these qualifications, multichannel retailers are gaining human capital at the expense of Web stores. Each time a dot-com hits the skids, talent hits the streets. The highly sought-after technophiles are less likely to be in short supply. While the service segment has been hardest hit, the retail sector is close behind.

Finally, though many shot themselves in the foot by separating their Web sites as business units from their stores and catalogs, multichannel retailers are slowly coming around to integrating all of their channels. Progressive firms such as REI, Seattle, a merchant of outdoor gear and apparel, and Boots, a United Kingdom drugstore chain, even have Web-enabled kiosks in their stores.

Invisible customers still exist.

For all their advantages, multichannel retailers still have their work cut out for them, including consolidating customer transactional data across all of their channels.

Where the e-store almost always knows its buyers and has the potential for a direct link to preferences, profiles and clickstreams, the real-world store has long had a disadvantage. Some have customer databases built on their private-label credit card base. Others have implemented loyalty programs that allow best customers to identify themselves.

Catalogs may have the greatest advantage over physical stores because they have a direct channel. But it’s often too difficult even for them to ascertain whether their buyers are shopping in other channels as well.

Blame it on legacy systems or technology issues if you will, but the bottom line is that the invisible customer still exists.

From channel-centric to customer-centric. Successful multichannel retailers understand that it does not make a difference if their customers buy from their physical stores, their Web sites or their catalogs.

What makes the difference — what creates success across all channels — is the fundamental understanding that there’s only one customer. And that means that all of your thinking, all of your systems and, certainly, all of your play in customer loyalty must be related to the customer.

• Michael T. Capizzi is vice president of marketing at Frequency Marketing Inc., Cincinnati. Reach him at [email protected]

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