Outlook: Keep Pace With Changes to Tap Into Online Growth

If there's one constant in Internet and multichannel retailing, it's change. Retailing online has undergone immense change in its short life of fewer than 10 years. But one aspect will stay constant this year: We will continue to see more consumers embrace Internet shopping than the year before.

According to Forrester Research, nearly 5 million new U.S. households will shop online in each of the next five years, totaling 63 million online-shopping households in 2008. Like a domino effect, increases in the number of customers shopping online lead to increases in use, revenue and profit.

Here are six key areas for retailers looking to capitalize on this growth:

1. Listen to your customer. Gone are the days of manufacturers deciding what widgets to make and the retailer deciding how to sell them to customers. Customers are now in the driver's seat. If you haven't started, now is the time to reassess your business and ensure you are integrating customer opinions and feedback into every aspect of your business.

Don't just look at the online experience; retailers need to analyze their entire multichannel experience. Identify areas that lack consistency or where an obvious disconnect exists. Develop a plan to improve the specific issues and create a more consistent, robust customer experience. Viewing your firm from the eyes of the customer will help uncover opportunities and areas needing improvement.

2. Integrating retail channels. Time and sales results have proven that the Internet does not cannibalize sales from other channels. According to Shop.org's “State of Retailing Online 6.0” report, 40 percent of online customers in 2002 were new to retailers' entire businesses. Retailers with multichannel operations are seeing the Internet's benefit to in-store and catalog sales. Customers who can transition easily from one channel to the next and use their channel of choice will visit more frequently and spend more than single-channel customers.

Though a seamless multichannel experience is the Holy Grail, building a consistent shopping experience (merchandise, prices, rules, etc.) across channels is challenging, and there are many variables to control. Retailers will continue to struggle with integration of inventory management systems, unified customer databases, unified product databases and tracking customer behavior across channels. The challenge of integration will vary depending on the technology legacy, but it is one of the most strategic and important changes that need to be invested in now to have an effect later.

3. E-mail deliverability. Retailers who have used e-mail as a marketing tool will tell you it's the most efficient, effective way to reach customers and increase direct sales. With the customer's permission, we have had the opportunity to e-mail on a regular basis. But with the rise of spam and e-mail misuse, the rules of e-mail marketing are changing.

Let's face it: We all receive too much unwanted e-mail. Consumers are getting inundated with inappropriate messages and growing numb to our marketing e-mails. Meanwhile, Internet service providers are combating spam their own way by preventing large blocks of commercial e-mail from reaching their subscribers and making it easier for subscribers to control their inbox.

In late 2003, the federal government passed its first legislation on spam and unwanted e-mails. Marketers need to stay apprised of e-mail marketing trends and ISP policies. It's never been more important to ensure that consumers are given maximum choice in their communication preferences. And, if retailers aren't doing so already, they should track open rates and confirmed delivery of e-mail in addition to click-through rates as measures of e-mail success

4. Customer experience online. Though multichannel retailing and the importance of a consistent shopping experience across channels should be a central concern for retailers, it's important not to forget about the special needs and abilities of your online channel. Retailers should focus on initiatives that make online shopping easier, quicker and friendlier. Site evaluations should be conducted at least every six months, and improvements should be made continually.

This year also is a time to examine new technologies that enable functions such as real-time assistance in selecting products, improvements in site search and multimedia applications to display products in a more robust manner. Broadband will continue to grow in use, and retailers will have opportunities to enrich and enhance the presentation of merchandise on their Web sites.

5. Keep on optimizing. There's a rule of thumb in online retail: It takes time and experience to learn and then optimize your marketing campaigns. The payoff can be huge. According to the Shop.org report, online retailers reduced their marketing cost per order 50 percent in 2002 against a backdrop of 26 percent revenue growth.

Whether you are optimizing or assessing your marketing programs, you can gain from tapping into your network of industry peers (or an industry network like Shop.org) to find specialists with experience in a specific subject. The industry has cultivated terrific talent and expertise in specialized areas. When it comes to optimizing, many consultants and firms will work on performance-based compensation arrangements where you pay based on mutually agreed upon success metrics. Optimization can yield positive returns if invested in properly. Tapping into knowledge and expertise is key.

6. New growth opportunities. As the years pass and retailers grow more experienced with search optimization, affiliate marketing, portals, e-mail marketing and other tried-and-true techniques, there will come a time when marketers need to find new ways to acquire customers and achieve growth. Growth will come from new customers, new markets, new partnerships, deepened relationships with existing customers and long-term loyalty. Retailers need to stay on the lookout for new customer acquisition tools and methods and, when possible, set aside time and budget to test their effectiveness.

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