1. Multichannel Retailing Lynda Gamans Poloian

2. Copyright ©2009 Fairchild Books All rights reserved. No part of this presentation covered by the copyright hereon may be reproduced or used in any form or by any means–graphic, electronic, or mechanical, including photocopying, recording, taping, or information storage and retrieval systems–without written permission of the publisher. ISBN: 978-1-56367-6332-1 GST R 133004424

3. L. Poloian Chapter 10 ©2009 Fairchild Books, A Division of Condé Nast Publications. 3 Chapter 10 Business Intelligence and the Future of Multichannel Retailing

4. L. Poloian Chapter 10 ©2009 Fairchild Books, A Division of Condé Nast Publications. 4 Business Intelligence Retailers need research, data, analysis, people, and solutions Business intelligence—information gathered from internal and external sources to help a company make good decisions The flow of information needs systems that support decision making

5. L. Poloian Chapter 10 ©2009 Fairchild Books, A Division of Condé Nast Publications. 5 Adaptive e-Commerce Architecture Architecture—Systems that power e-commerce Legacy systems—have been in operation for many years Reference assembly architecture— operational platforms comprised of logical service centers; enable deeper analysis New systems better serve multichannel retailers

6. L. Poloian Chapter 10 ©2009 Fairchild Books, A Division of Condé Nast Publications. 6 Performance Metrics: General Tendencies Measure customer conversion rates, online and store traffic, ad hits, response rates, and catalog drops Deeper knowledge sought including how: –Catalog dynamics affect customer retention –E-mails drive traffic to other channels –Growth, profits, and ROI are better measured

7. L. Poloian Chapter 10 ©2009 Fairchild Books, A Division of Condé Nast Publications. 7 Web Analytics Web-based data comes from several areas: Customer access and use Accuracy of order fulfillment Post-sale follow-up Customer security Real-time analytics that capture data for immediate use are an important trend

8. L. Poloian Chapter 10 ©2009 Fairchild Books, A Division of Condé Nast Publications. 8 Evaluating Web Site Performance: What Makes a Good Site? Strong customer traffic and stickiness Home page and branding recognition Navigation efficiency Merchandise availability Positive shopping cart experiences Good customer service Cross-channel shopping options

9. L. Poloian Chapter 10 ©2009 Fairchild Books, A Division of Condé Nast Publications. 9 Types of Assessment Tools A/B Split Testing Compares two variables along the same dimension Used in direct marketing and advertising testing Possible to test two different illustrations in same ad Multivariate Testing Looks at several elements to find optimal relationships Tests many possible outcomes Taguchi testing is used by online retailers

10. L. Poloian Chapter 10 ©2009 Fairchild Books, A Division of Condé Nast Publications. 10 Types of Assessment Tools Logistic Regression Analyzes strength of response to stimuli Test prices or incentives Used in predictive modeling Cognitive Measures Considers behavioral and psychological responses to stimuli Used to determine traits of Web site users Helps in developing more effective Web sites

11. L. Poloian Chapter 10 ©2009 Fairchild Books, A Division of Condé Nast Publications. 11 Selecting Web Metrics Measuring Online Advertising Effectiveness: Counting clicks has been replaced with more sophisticated click-stream metrics Tools that track customer interface with advertisements determine how customers: –View Web pages and how long they stay on a site –Listen to audio or watch video –Use widgets and microsites

12. L. Poloian Chapter 10 ©2009 Fairchild Books, A Division of Condé Nast Publications. 12 Assessing Web Video Video growing rapidly as online tool Women twice as likely to watch online video than men Retailers use direct-response video to reach customers Costco increased sales of telephones by using video messages

13. L. Poloian Chapter 10 ©2009 Fairchild Books, A Division of Condé Nast Publications. 13 E-Mail Effectiveness E-mail works best when part of a multichannel plan Spamming is an obstacle to E-mail delivery by retailers Use of name brands in bogus E-mails is called brand hijacking and is unethical and illegal

14. L. Poloian Chapter 10 ©2009 Fairchild Books, A Division of Condé Nast Publications. 14 Mobile Metrics Because it is a newer channel, mobile conversion rates are more difficult to measure Image, color, and word testing is common M-commerce is growing; suitable metrics will follow

15. L. Poloian Chapter 10 ©2009 Fairchild Books, A Division of Condé Nast Publications. 15 Catalog Fulfillment Measures 1.Cost-Sales Relationship 2.Cash-to-Cycle Time 3.Perfect Order Index 4.Back Order Fulfillment 5.Fill Rates

16. L. Poloian Chapter 10 ©2009 Fairchild Books, A Division of Condé Nast Publications. 16 Other Catalog Information Data analytics are used to view customers lifetime purchase histories Artificial intelligence is used to tailor catalogs for customers Online sales are exceeding catalog sales for some retailers Many performance metrics used today originated in the catalog industry

17. L. Poloian Chapter 10 ©2009 Fairchild Books, A Division of Condé Nast Publications. 17 Brick-and Mortar Productivity Annual sales, profitability and sales per square foot are classic store metrics Units per transaction and sales per hour are also used New measures include video counters that: –Measure store traffic –Help allocation staff –Make within-chain performance comparisons

18. L. Poloian Chapter 10 ©2009 Fairchild Books, A Division of Condé Nast Publications. 18 Impact of Multichannel Customers on Store Productivity Multichannel customers –spend twice as much as those that use only one channel –are price conscious and may not be particularly loyal –shop more frequently Stores contribute heavily to the gross margin of multichannel retailers

19. L. Poloian Chapter 10 ©2009 Fairchild Books, A Division of Condé Nast Publications. 19 Maximizing Multichannel Return on Investment Productivity is measured not only by return on financial assets, but also on customer value and retention over time Attributes that have made brick-and-mortar stores popular are being successfully transferred to online stores Customers are becoming more comfortable with multichannel shopping

20. L. Poloian Chapter 10 ©2009 Fairchild Books, A Division of Condé Nast Publications. 20 Legal Impediments to Multichannel Retailing Online Sales Tax Legislation—issue regarding imposing of sales tax and standardization across states Privacy Bills—some states are attempting to make online advertising illegal Network Neutrality Debate—promotes the ability of Internet users to surf the Web without intrusion from ISPs

21. L. Poloian Chapter 10 ©2009 Fairchild Books, A Division of Condé Nast Publications. 21 Pros and Cons of Sales Tax Issue States feel justified in collecting taxes on online sales Five states that do not have sales taxes do not wish to comply Customers who are used to paying taxes seem neutral regarding compliance Some believe that small businesses should be exempt from collection

22. L. Poloian Chapter 10 ©2009 Fairchild Books, A Division of Condé Nast Publications. 22 Environmental Influences Shaping the Future Personalization, shoppertainment, and extended customer service Experientialists would rather shop in malls than online Those who value their time or want extensive product selection will gravitate online

23. L. Poloian Chapter 10 ©2009 Fairchild Books, A Division of Condé Nast Publications. 23 Technological Innovations and Solutions Hot products and cool services: Mobile phone selection from discount to designer Touch sensitive displays ranging from windows to mobile phone screens Eye tracking as a research tool Holographic sales associates and digital signage Sensory enhanced marketing tools Full spectrum customization

24. L. Poloian Chapter 10 ©2009 Fairchild Books, A Division of Condé Nast Publications. 24 Technological Innovations and Solutions

25. L. Poloian Chapter 10 ©2009 Fairchild Books, A Division of Condé Nast Publications. 25 Enterprise Solutions Virtualization helps retailers consolidate many electronic applications Supporting kiosks, self-service checkouts, electronic signage and shopping carts will be easier Virtualization brings lower power needs and higher efficiency to retailers

26. L. Poloian Chapter 10 ©2009 Fairchild Books, A Division of Condé Nast Publications. 26 Sustainability Green building—new outlooks regarding design and construction of retail facilities Green products—greater demand for products and apparel from environmentally sustainable materials Green customers and their wallets—time will tell if customers will spend more for green products H.L.N.R. green boutique in Los Angeles

27. L. Poloian Chapter 10 ©2009 Fairchild Books, A Division of Condé Nast Publications. 27 Economic Volatility Radical shifts in the prices of oil and gasoline make customers uneasy and affect their expenditure patterns U.S. customers are newly experiencing price fluctuations whereas many global citizens live with high energy prices Repercussions of mortgage, banking, and housing crisis have left a mark on the global economy

28. L. Poloian Chapter 10 ©2009 Fairchild Books, A Division of Condé Nast Publications. 28 Impact of Social and Lifestyle Changes Generations X and Y will have significant influence over future retail sales “Locavores” purchase products close to home Many want multiple needs met and shop in mixed use and lifestyle centers Retailers will adapt

29. L. Poloian Chapter 10 ©2009 Fairchild Books, A Division of Condé Nast Publications. 29 Incongruence in Service Supply and Demand Some retailers will add concierge and other extended services Retailers will be challenged to find qualified people to fill these positions Disconnect between high customer expectations, high retail service levels, availability of training, and low-paying professions

30. L. Poloian Chapter 10 ©2009 Fairchild Books, A Division of Condé Nast Publications. 30 Multichannel Retailing: A Final Word Online sales drive performance in many companies that have experienced declines in brick-and-mortar revenue Mergers and acquisitions continue to shape retail organizations New leadership may herald positive changes Technological changes continue to dominate Success measured by customer acceptance

31. L. Poloian Chapter 10 ©2009 Fairchild Books, A Division of Condé Nast Publications. 31 Summary Business intelligence holds the key to effective multichannel retailing Online selling has accelerated changes that began decades ago Concurrently challenging and exciting times in which to trade