Retailers Learning from Past Web Woes
Many retailer's online operations are proving to be surprisinglyeffective, according to research by Shop.org and The Boston ConsultingGroup, and an increase in efficient online marketing may get the credit.
Many retailer's online operations are proving to be surprisinglyeffective, according to research by Shop.org and The Boston ConsultingGroup, and an increase in efficient online marketing may get the credit.
Many retailer’s online operations are proving to be surprisingly effective, according to research by Shop.org and The Boston Consulting Group (BCG) and an increase in efficient online marketing may get the credit.
The survey, which examined 63 retailers of various sizes in several categories, found that both multichannel and Web-based retailers have learned from past marketing missteps and many are now taking a much more considered approach to promotions. Instead of offering steep discounts to attract customers, retailers are finding ways to offer the minimum discounts necessary to increase sales volume, and to deliver targeted promotions to the more than 100 million consumers expected to use the Internet over the holiday season.
“The key to retailer success over the holidays is a question of focus. Retailers now know that the most valuable customer is the multichannel customer — the customer who researches and purchases products online and in stores or through catalogs. The online channel is an important avenue to reach these customers and achieve a larger share of their wallets,” said Peter Stanger, a vice president at BCG. “Retailers who deliver merchandising and promotions through online and offline channels targeted at the biggest spenders in any given category will emerge as the winners this holiday season. On the other hand, an undifferentiated, heavily discounted offering will lead to low margins and losses.”
If the 2000 holiday season was the year offline retailers dominated e-commerce traffic, then the survey suggests the 2001 season will mark the year those offline retailers learned how to incorporate online marketing into their efforts. In the third quarter of 2001, only 22 percent of marketing spending by the companies in the survey went to offline media. The 2000 average for offline spending was 46 percent; in 1999 it was 62 percent.
Online vs. Offline Media Spending Share of Marketing Spend (%) |
||
Quarter | Online Media |
Offline Media |
---|---|---|
Q1 2000 | 49% | 51% |
Q2 2000 | 59% | 41% |
Q3 2000 | 64% | 36% |
Q4 2000 | 55% | 45% |
Q1 2001 | 61% | 39% |
Q2 2001 | 71% | 29% |
Q3 2001 | 78% | 22% |
Source: Shop.org/BCG |
Of the 78 percent of marketing money going online, portals are received 28 percent in the third quarter (up from 23 percent in the second quarter) and banner accounted for 22 percent (up from 13 percent in the second quarter). The only significant offline spending went to catalogs in the third quarter, which accounted for 12 percent. Expensive, less efficient marketing programs, such as television (which accounted for less than 1 percent of third quarter dollars), print and newspaper inserts are out.
Other findings from the Shop.org/BCG Study include:
“Since the dot-com correction and through the current recession, retailers have learned to be better marketers online, which is helping to put them in stronger financial shape than last holiday season,” said Elaine Rubin, chairman of Shop.org, which is the online arm of the National Retailing Federation. “As retailing on the Web has matured, the bar measuring online success has also been raised and competition between retailers and across channels has intensified. Perhaps the most notable developments were the steps many retailers took to integrate their sales channels. That’s due to the fact that in this challenging environment, one of the most effective ways for retailers to increase their share of the consumer’s wallet is to focus on cross-channel coordination.”
As retailers focus on deepening their share of wallet of multichannel customers, the Shop.org/BCG study found increasing numbers of marketers making efforts to enhance the level of coordination in marketing and transactions.
Two examples are the use of catalog “quick order” features online (51 percent of retailers surveyed) and providing in-store Internet terminals that allow customers or staff to place orders and locate out-of-stock items (29 percent of retailers surveyed). In addition, many retailers are increasing the level of in-store and catalog promotions for their online initiatives, and they increasingly use Web sites to promote stores and offer catalogs. This year also marks a widening effort to collect customer email addresses during in-store and catalog transactions for use in later promotions.
The result has been not only an increase in the number of consumers walking into stores with Web-site printouts of what they intend to buy, but also an increasing willingness among online shoppers to contact customer service when a problem arises, rather than abandon the transaction.
“These are examples of how online shopping is no longer an experiment for consumers,” Stanger said. “The mass market now uses online channels to browse, research and compare. That means the competition for a consumer’s wallet often begins, and sometimes ends, before they enter a store.”