October 22, 2004
Aberdeen Report: True Multichannel Sales Desirable but Rare
By Evan Schuman, eWEEK
The analyst report says nearsighted corporate vision and outdated business models are to blame for e-commerce difficulties.
Although it is almost universally accepted that a truly integrated multichannel retail approach is the ideal, few retailers have been able to get anywhere close, reports a recent Aberdeen Group research report.
The report cites quite a few roadblocks, ranging from corporate attitudes and fears to difficult technology integration problems such as consistent order and inventory management processes and delivering a single view of customer history.
This internal problems run against today's typical purchasing consumer who insists on faster responses and stores that leverage—instead of being ignorant about—a consumer's online efforts.
"Most enterprises attempt to deliver these services to the outside world while operating behind walls of channel-specific sales and fulfillment organizations," the report said. "Without a rationalized cross-channel internal structure, companies struggle to find creative ways to collaborate more effectively internally in order to make organizational stovepipes invisible to the customer and keep up with rapidly evolving purchasing behaviors."
Paula Rosenblum, one of the authors of the report, said there is an easy remedy for retailers who are ready and willing to embrace the concept of multichannel: compensation incentives.
Senior executives can talk about customer-centric business models and that departments should cooperate with other departments, but what most managers look to when trying to figure out their true marching orders are their bonus plans. If store managers are incentivized solely on sales made in certain brick-and-mortar locations and not on online sales, they are almost certainly going to push sales in that direction, Rosenblum said.
"People always do what they are incented on," said Rosenblum, the Aberdeen director of retail research. "You need to structure yourself as a brand, not a bunch of channels."
The multichannel concept acknowledges that both offline and online have their own strengths and weaknesses and that a well-thought-out combination of the two is the retailer's best option. But it's not easy and it's going to require breaking up a lot of time-honored divisions. About 25 percent of the retailers interviewed say brick-and-mortars still fear that online operations will cannibalize their sales, according to the report.
"Some organizations view the need to provide multichannel sales and service as yet another burden to shoulder with unclear impact on operating margins and corporate profits," the report said. "This vision is shortsighted."
Another key finding is at the core of one of the retail IT challenges: that many retailers either did not know or were unable to measure the profitability of their multichannel customers. Aberdeen labeled that level of sales lack-of-awareness "somewhat disturbing."
"A company's inability to measure profitability of these customers should be a red flag to any senior executive and call the enterprise's multichannel strategy into question," the report said.
Aberdeen encouraged retailers to invest more heavily in IT so that innovations deployed by online operations can yield information that can be shared by the rest of the company. The survey and the analysis suggested and that most multichannel retailers' technology investment priorities include integrated order management systems, Web content management, multichannel catalog syndication, guided selling, and integrated search and natural language processing.
As long as retailers are breaking down barriers separating online and offline sales operations, they might as well make it easy for software to be distributed and used without IT interference, the report said.
A Web site, for example, is a great means to inexpensively and quickly test different campaign messages and then be able to apply those lessons to other areas of the business.
"For this type of modeling to be effective, however, it is critical to put marketing automation and campaign management tools directly in the hands of business users," the report said. "If marketers have to go to the IT department to request support to test a new idea, the hassles necessary to get this support result in new ideas going nowhere."
The most popular cross-channel tactic is to allow consumers to use the Web to quickly conduct extensive research and to quickly find and pay for the items, but to then forgo the shipping costs and delays by picking it up at a nearby brick-and-mortar location.
But a lesser-used approach is having consumers in brick-and-mortar locations be given access to online information while in the store. In theory, this would allow for a depth of information that is not practical on the shelves. Indeed, the use of stand-alone kiosks can deliver demonstrations and other multimedia-rich presentations in a manner that is faster, more stable and more elaborate than what is practical with even a broadband connection.
The Aberdeen report points out, however, that such efforts must be described carefully. "Sponsors and champions of these initiatives are very careful to avoid any mention of the word 'kiosks,'" the report said. "The dearth of return-on-investment dollars from previous kiosk investments has left a bad taste in the mouths of senior executives."