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Source: Interactive Week

Posted on November 1, 2001

      With prospects for a blue Christmas more apparent by the day, some multichannel merchants see a chance to salvage the season with incentives designed to pad the fourth-quarter fall and provide payoffs in more prosperous times.

      The trick is to steer in-store customers to Web sites, where a long-term relationship can take root. Using incentives such as free products or services, the retailer lures customers online, where data and dialogue can develop. "What they're getting to is an ability to grow with their customer and grow with the life cycle of their customer," says Richard Ogawa, senior vice president of marketing technology firm FastForward in Pittsburgh.

      While some industry experts look at coupons, sweepstakes and discounts as signs of nothing more than a weak retailing season, Ogawa says they can actually be good investments - as long as the offers keep the customer coming back to the merchant's or manufacturer's site. To do that, the merchant must build a database that combines in-store and online transactions. Communicating special offers through e-mail and tracking responses is also part of the process, he says.

      The importance of keeping the communications channels open becomes apparent when you realize that acquiring a customer typically costs five to six times more than retaining one, says Ogawa, a former buyer for Macy's and Federated Department Stores. "You've got to reach the prospect side of the customer," he says. "If I buy something in the store that includes a free product, make me finish the transaction online. I'm going to complete the process because there's an incentive."

      From that online communication, a software manufacturer, for example, can retrieve a wealth of data about where its products are selling and who the customers are.

      One of FastForward's clients, Imation, a data storage and digital color imaging company, needed to automate and streamline the process of bringing consumers to its Web site. The most immediate change was to eliminate the laborious process of having customers fill out printed cards to qualify for rebates and free items with its products.

      In place of snail mail, the new system allowed customers to earn free products by entering codes at the Web site from products bought in the store. From that point on, customers begin acquiring points that can be used toward the purchase of CDs, DVDs, digital cameras, software and other products. While such incentive programs have been around for years online, many brick-and-mortar retailers have been late to the party when it comes to online resources, Ogawa says.

      But apparently, the mainstays of merchandising are catching up. Indeed, the importance of multiple channels has never been more important, analysts say.

      According to Shop.org, the online retailing branch of the National Retail Federation, shoppers who use multiple channels - stores, catalogs and online - tend to spend more and be more loyal. The trade group's recent survey, based on more than 48,000 interviews with shoppers in all channels, found that store shoppers who also bought online - from the same retailer - spend an average of $600 more annually in-store than typical store shoppers of that retailer.

      Shoppers who bought in all three channels now represent 34 percent of online shoppers among those shopping at three-channel retailers. Also, the study found that reaching the "super" multichannel customer is key to a retailer's success. Super shoppers are more likely to be customers of all three channels and purchase four times more frequently online than the average online shopper. Super shoppers also purchase from a retailer's store 70 percent more frequently than the average store customer and 110 percent more frequently from the retailer's catalog.

      While pure online retailers, such as Amazon.com and eBay, develop their own catalogs and partnerships with brick-and-mortar stores, the traditionalists, such as J.C. Penney and Sears, Roebuck and Co., have developed sophisticated marketing systems that leverage the online world. For catalog retailers like Lands' End, meanwhile, Web sites have added an efficiency and range that seems ideally suited to the medium, executives say.

      For Amazon, partnerships with Circuit City Stores and Target mean a larger footprint to go along with the increasing output of catalog-style newspaper inserts. Despite its failure to make a profit, Amazon could survive a lean season on the basis of its strong relationship with its customers.

      "I can't tell you we expect X or Y on sales," says Bill Curry, an Amazon spokesman. "But if people want to order a product for pickup at Target or Circuit City, we make sure it's there, that they benefit from our wealth of information and that we provide them the ability to shop 24 hours per day, seven days per week."

      Ebay, meanwhile, is publishing its first Christmas catalog this year, with a goal of becoming a major player during the holiday season, says eBay CEO Meg Whitman.

      The payoff for those efforts could come later, however. Analysts appear to have reached a consensus that this holiday sales season will be the worst in a decade amid fears of further terrorist strikes and economic uncertainty. Still, the verdict is not in yet. According to Columbus, Ohio, market researcher BIGresearch, 31 percent of respondents to a recent survey said they would spend less for the upcoming holidays and almost 70 percent said they would spend the same or more.

      At this point, the survey shows, discounters have the inside track.

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