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Multichannel retailing today (part 4)

Multichannel retailing today (part 4)

In the first three parts of this series on multichannel retailing, we discussed how the internet has evolved. In its early days the internet was all about low prices. Now consumers are willing to pay more in return for a good service. Retailers like John Lewis and Amazon are concentrating on quality of service, not just price. They are looking to deliver the right balance of service, convenience and value for money to keep their customers coming back time and again. In this issue we look at some of the benefits and the risks of multichannel retailing.

The main benefits of moving from a shop based business to a multichannel retail business (selling in store and online), are often as follows.

1. Business efficiency
So you already have a shop. That means you carry stock, you have relationships with many leading giftware manufacturers or wholesalers. You have staff available Monday to Saturday, possibly even Sunday. You have valuable knowledge about gifts and giftware products.

To run a successful website what do you need?

* Staff to manage orders and customer enquiries
* Stock
* Supplier relationships
* Knowledge about products

You also need a website with ideally the ability to link to your shop system - this can be achieved with a relatively small investment. You need to put products and pictures on the system - can this be done by you or your staff in usual working hours?
In most cases independent specialist retailers already have the resources needed to run a website alongside the shop. The benefits include; opening a selling channel 24/7, increasing efficiency of the business because you are working your assets harder. If your
shop is quiet at certain times of the week, your staff could be picking website orders, or they could be updating images of products, or product descriptions. It's not hard to do, it just takes time. And this activity doesn't necessarily cost extra because you are already paying for their time.
So a retailer has most of the resources needed to run a website, and therefore a multichannel business. By doing so they work the assets harder, with better utilisation of staff and buildings they increase efficiency.

2. Increase in revenue
Many studies have shown how multichannel retail businesses earn more per customer than single channel businesses. The multichannel customer tends to buy more frequently and be more likely to partake in cross selling and up-selling. A survey by management consulting firm McKinsey reports that, "multichannel customers spend 20-30% more, on average, than single-channel ones do." An IBM survey gave similar results.

We have seen that independent retailers tend to increase revenues when moving to a multichannel retail model. Their customers find it more convenient to buy online without having to always travel. And they can buy at times of the day when it is convenient for them.

So, your website should bring additional sales in. Bet there are other less obvious benefits as well. The internet influences spend in the shop as well. Digital research specialists eMarketer found that for every £1 in online sales, the internet influenced £3.45 of store sales and they forecast that web-influenced shop sales will grow, at a 19% average annual rate to 2012, compared with a 12% rate for retail e-commerce.
So there are several ways that multichannel retailers are increasing their revenues.

3. Increase in customer loyalty
Consumers are increasingly looking to multiple shopping channels. Post Office research questioning 4,000 consumers in 2009 showed that 83% of consumers use multiple channels, with only 17% using store only. Yet only 4% of younger people aged 16-34 use store only! So, clearly consumers are developing strong multichannel shopping habits. They want to shop via the medium of their choice; store, telephone, website, to fit around their lifestyles. They want to feel engaged by the retailer and they expect retailers to support multichannel shopping, in fact market researchers comScore found that 97% of consumers expect a seamless shopping experience across online and offline channels.
For those retailers that do offer a good multichannel shopping experience, they are able to engage with their customers more frequently and in a way that is more efficient because it is when and where the customers want to shop.
These more frequent and customer friendly engagements increase loyalty. The same research by multi national IT consulting company IBM, as noted above, found that multichannel customers tend to have been customers for a longer period of time than
single-channel customers.

4. Reduce risk of losing customers
Just as the internet is an opportunity to engage your customers more often, it is of course also a threat. Consumers like to use the internet for research and will use a variety of websites to find the information they are looking for. Hopefully your website will be one of them. If you don't have a website to go to, there is a higher risk that your customer will find a local competitor and engage with them. By having an informative website, and possibly linking to suppliers and other sources of information you can help your customers find information they often need.

5. Bring in new customers
Internet usage is still growing. Forrester Research found that half of UK consumers have currently already shopped online (28 million people) yet by 2014 they expect there will be 37 million. With free facilities like Google Maps the internet is a great place to find out specialist shops in your area and more people are using the internet to locate a shop near them. For the retailer it's essential to have a good presence online, that is set up properly for Google, to advertise the shop to potential new customers. This is also a great time to remind people what you sell and why they should visit.

6. Sell to new customers
There are some well known companies that have grown very large on the back of selling to new customers via the internet. Some independents may think there is no opportunity now. However they would be wrong. Independents can and do find ways of successfully selling to new customers via the internet. The most effective way is to look at a particular niche and focus on that for new business. More about this in future articles.
There are many benefits to multichannel retailers. There are also some risks to look out for.

Multichannel requires an investment in a computer system and website. One of the biggest problems in multichannel retail is when retailers invest in bits of a system and then find out they don't connect together. This means that stock control is much harder, also customer accounts are not centralised. The computer system should allow the website and shop to work together seamlessly. It can make the difference between a successful or unsuccessful multichannel venture.

The problem is much worse for big retailers, but independents have to watch out as well. Independents sometimes feel that the larger retailers have it easier as they have specialist people and big budgets. But the reverse can be true, change can be much harder and time consuming for larger retailers as they have huge investments in existing IT infrastructure and making big changes for hundreds of staff is very challenging. Smaller retailers can be more nimble and invest relatively quickly in a decent multichannel system.

It's important the retailer does not end up going down a cul-de-sac with their computer systems, ie. a path that does not lead to a multichannel experience for the customers, because they may well have to come back out and start again.

David Mackley MBA BSc is MD of Intelligent Retail - providers of Multichannel EPoS and e-commerce websites for independent retailers. If you have any questions you can contact David on +44 (0)8456 800 126 or

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