Thursday, January 14, 2010
Multichannel Retailing: A Source of Competitive Advantage
During the 2009 holiday season, ForeSee Results measured customer satisfaction on 40 major retail Websites. When results were analyzed by business model, pure plays had an aggregate customer satisfaction score of 81 on a 100-point scale, while store-based retailers had an aggregate score of 77. Heading the top 40 list were two pure plays, Amazon (87) and Netflix (86). Trailing them were well recognized store-based retailers, including Wal-Mart (79), Target (78) and Best Buy (77).
ForeSee Results summarized, saying “in general, Websites for multichannel retailers significantly underperform Internet pure plays, which makes sense since they have more channels to divert corporate attention and focus.”
From this explanation, it sounds as if multichannel retailers are expected to deliver a poorer shopping experience. But this shouldn’t be the case. Multichannel retailers have the potential to create a highly satisfying cross-channel shopping experience by tying together the best attributes that stores and e-commerce have to offer.
In a November 2009 interview with me [the full version of which is here], Fiona Dias, an executive vice president of partner strategy and marketing at GSI Commerce, which runs the Websites of large retailers, admonished multichannel retailers for being slow to use their inherent strengths to prevent Amazon and other pure plays from taking market share. Here is a passage from that interview:
Shame on us. As a retail community, we have allowed Amazon to grow to be a $22 billion company. We have allowed it to happen because we haven’t leveraged our biggest assets, which are our stores and our people. We have things that Amazon doesn’t have.
A weapon against Amazon is multichannel because consumers love being able to get their product immediately. They love being able to touch, feel and see it. They love being able to return it easily to stores. There are a lot of things that consumers love about the multichannel experience. For the retailers that have done it, it’s paid off big time for them.
For the retailers who are asleep and ignoring this, they’re basically saying to Amazon, “Please take our business because we’re not going to leverage our assets and you’re welcome to steal our customers.”
I guess the overall point I would make is multichannel is not a nice thing to do if you have some spare time. Multichannel is a necessity to be able to defend against Amazon and the other Internet pure plays.
There were signs this past holiday season that some big retail chains were beginning to fight back. Walmart.com launched a limited online price war with Amazon in mid-October. Later, Raul Vazquez, Walmart.com’s CEO and chief executive, declared, according to The New York Times, that “it was only a matter of time” before it dominated Web shopping. Meanwhile, a number of traditional retailers, including Wal-Mart, J.C. Penney and Best Buy, offered Black Friday promotions online to attract the growing number of consumers who preferred to shop on the Internet rather than in stores.
Understandably, store-based retailers want to increase their online sales, but their top priority is to use their Websites to drive customers to their stores. That is why at the end of the day Wal-Mart and other store-based retailers will derive the greatest competitive advantage from developing tighter multichannel expertise that empower shoppers (e.g., by offering buy online, pick up in-store) and increase their own operational effectiveness (by leveraging the product information on their Websites across their other channels).






