Retailers Bring the Internet Inside to Compete Effectively

If there is one thing retailers will take home after the holiday season, it is the knowledge that tough times are ahead.

Sales were softer than expected, and stores were fighting for this market against each other and online retailers. The honeymoon is over for pure dot-com retailers. The weak have been winnowed out, and the strong are learning rapidly from their experiences.

Traditional stores will have to focus on customer service and on their relationships with customers to maintain their share of customers’ wallets. They, too, can learn from dot-com mistakes and use the experience to integrate the Internet into their stores to strengthen customer relationships.

In many cases, customer service has declined in recent years. Stores are expanding and employee rosters are shrinking, creating difficulties for shoppers. Consider a typical consumer in this past season’s rush. She probably had to endure massive crowds trudging up and down aisles to find the scooter her child had been asking for since July.

After aimlessly wandering all seven floors of the store and asking a dozen employees where the scooters were, the shopper finally stumbled upon the correct aisle – only to find that the store was out of stock. Frustrated and empty-handed, the shopper vowed never to return.

When stores were the only place to buy scooters, traditional retailers could get away with this, but now people can shop online and, recent failures notwithstanding, consumers are embracing it eagerly.

However, retailers can fight back by incorporating Internet information in a brick-and-mortar environment to efficiently allow window-shoppers to become informed customers. Integrating the Internet in the form of in-store kiosks gives retailers a big advantage over e-tailers because retail stores always will be able to offer features that e-tailers cannot, such as physical access to the product and instant shopping gratification.

Shopping online may save time, but delivery can take weeks, whereas customers have instant satisfaction when buying products offline. In 1999, e-tailers suffered a public relations disaster when they failed to meet delivery commitments for toys intended as Christmas gifts. It appears this problem was corrected for the 2000 season, but even those who did get them in time sometimes found that the products looked attractive online, but in reality were poorly made and physically unattractive.

To make a bad experience worse, unsatisfied customers often were forced to pay additional money for postage to return the unwanted products. A Web-enabled kiosk in a store gives shoppers the best of both worlds: They can use Internet resources to research the scooters and kick the wheels to determine whether they are well-made.

While assisting consumers in their quest to find the perfect scooter, integrating the Internet also helps companies better understand their customers by tracking their interactions and transactions. Stores typically collect data only on what shoppers buy, but kiosks collect hugely valuable data on what shoppers are interested in and what they want to buy, giving a more accurate image of their customers.

Without this, companies must rely on focus groups to build a picture of their customers’ wants and needs, but these give only a snapshot of a small sample of customers at a specific point in time. Kiosks allow marketers to collect and analyze transactions and interactions in real time, giving them a head start in predicting the next fad in a fickle industry. Such data offer a win-win situation, providing customers with the information to become well-informed shoppers and enabling businesses to form a complete view of customers’ needs.

Storing the data in a central location – in a data warehouse – enables marketers to discover easily how many shoppers researched scooters, as well as how many scooters were purchased.

This information allows a company to predict the trend pattern for scooters in its stores. If the company orders more scooters and ships them to meet demand and does it sooner than competing stores, it makes more money. Because fads tend to be short-lived, a head start increases both customer satisfaction and store profitability.

Discovery and management of fads is a small part of the work of data warehouses. Their essential function is to record the routine ebb and flow of commerce with unprecedented detail and timeliness and to analyze the data so it can be used to stock the appropriate products in each store. Data warehouses are equally adept at noting drops in sales and changes in customer demographics to help stores avoid overstocking.

Data warehouses also arm stores for the annual Christmas avalanche, when getting and keeping the inventory current can mean the difference between triumph and disappointment for the entire year. Stores that manage their inventory effectively get through the busy Christmas season with enough wrapping paper, ornaments and gifts to supply all their customers, without surpluses to be sold at clearance prices immediately afterward.

Understanding both interactions and transactions creates new efficiencies and levels of service. Integrating the Internet into department stores provides businesses with the data to build a much deeper understanding of their customers and gives customers the resources needed to find the scooter easily and quickly.

Even in the best of times it makes sense to develop a deep understanding of customers, but in the year ahead, it could spell the difference between success and failure for brick-and-mortar retailers.

• Rick Schultz is vice president of marketing for the Teradata Division of NCR, Dayton, OH. His e-mail address is [email protected]

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