The Elusive True Multi-Channel Retailer

In the aisles of the NRF show, true multi-channels were hiding behind channel separatists.

While walking the aisles and hitting the parties at the National Retail Federation annual show this week, I did what I normally do, which is to beg CIOs to tell their thoughts and observations.

Tried to hit as many of the most important topics as possible before the CIOs extracted themselves to talk with someone who would give them info, rather than extract it. But a theme that emerged in almost every conversation was the online/offline struggle and I usually asked how much of that CIO's chain's revenue was virtual as opposed to physical.

That's where one particular CIO?who put his own chain's online revenue significantly south of the industry standard of about 5-6 percent?offered a wonderful insight. When asked what the percent would likely be when his company would take online-offline integration seriously, he said, "The day that neither myself nor my CFO has a clue what the percent breakdowns are, that will be the day we?ve got it right. As long as my numbers are sufficiently segregated that I can easily identify what's online and what isn't, we'll still have a long way to go."

This is a technology exec who truly gets it. The ultimate execution of a multi-channel strategy is that the channels become indistinguishable, at least in terms of revenue.

When a customer walks into a retailer and buys a $2,000 oven, did he make the purchase because of a window display or a newspaper ad? Was it perhaps a radio or TV commercial or a Web banner? Could it have been because of a neighbor's purchase? Does the customer himself really know?

Customers can go into a store, touch and feel merchandise and then buy it online hours later because they don't feel like squeezing it into their car and it's the easiest way to do it. Or maybe they think they can get the best price online? The reverse is even more true, where shoppers find what they want online, but make the purchase at a local merchant because they want it immediately or because they think it will make a potential return easier.

Those examples are the simplest cross-reference examples of online-offline blurring. The showfloor this year had lots of examples of more aggressive integration, with someone trying on a dress, beaming images of the outfit to the Web and quickly letting IM opinions determine the sale. How do you label that?

This is hardly a trivial issue. Jupiter Research on Jan. 17 issued a report projecting that, within four years, the value of brick-and-mortar sales that will be influenced by online research along will top a trillion dollars. It projects a 12 percent compounded annual growth rate and it declares that "off-line-influenced sales" will account for 40 percent of all U.S. retail sales by 2011.

Then there's the funky matter of cellphones, which on their own are little blizzards of blur. When a cellphone's camera can be aimed at a 2-dimensional barcode on an in-store poster and that cellphone is instantly displaying a deep Web site giving more details, is that a Web sale or a physical sale? More to the point, from the CFO's perspective, what possible difference could it make?

The only effective multi-channel strategy is where all channels?Web, in-store, catalogue, call center, cellphone, etc.?are incentivized to help each other. Their only goal is getting the sale and if the situation says the best way to do that is brick-and-mortar, the online manager should be rewarded?not punished?for doing so.

Regrettably, that's now how most large retailers operate. Few know that better than John McAteer, who heads all retail efforts for Google.

He dubs the way many retail chains tackle multi-channel as "multi-silo-ed," in the sense that they are distinct units where such distinction makes little strategic sense.

Google's approach starts with search and then expands into wherever it can. One approach they're toying with involves localized searches. For example, someone is searching for a specific kind of product and their IP address reveals they are likely in the Mt. View, California, area. Ads for local merchants selling those products will be displayed. That's online specifically pushing offline, using the only thing that makes offline convenient: physical proximity.

One of McAteer's struggles is the lack of an effective way to identify online shoppers who don't feel like registering. Years ago, cookies were seen to be the answer, but he's now seeing figures that some 20 percent of users wipe out all of their cookies every night. Sometimes, anti-spyware programs do it automatically for a consumer. Either way, cookies do not appear to be a longterm answer.

Will biometrics be that answer? If a fingerprint-scanner-equipped-mouse is well-designed, it might prove effortless to use.

Technology is even challenging Google's IP Lookup for geography as Virtual Private Networks and other security approaches will either block that information or make it inaccurate.

There's little question that creating truly integrated retail environment is the way to go, but no one ever said that world of changing technology will make it easy.