Reverse retailing brings store traffic, online sales, cyber attacks

As more merchants master the art of omnichannel retailing, they benefit from a new phenomenon called 'reverse retailing,' or intentional showrooming. However, this has led to an increase in online security problems.

Reverse retailing is based on the concept that the physical space retailers occupy is about the experience first and the sales second, said Rohit Bhargava, a professor, author of "Non-Obvious" and founder of the Influential Marketing Group. "The sale happens through an e-commerce platform instead of in the store. In terms of security concerns, there is also more data being captured. This means a greater amount of information, which can leave consumers exposed."

If latency in processing or fulfillment affects the online and in-store consumer, then it's a big risk for the company. "The risk is compounded with the complexity of integrated inventory, for example, where the consumer can check inventory in real time. If one system goes down, then it used to affect only traditional back-end processes such as warehousing. Now it affects the front end of the deal, so consumers are clearly aware," Bhargava told FierceRetailIT.

There is a trend of merchants starting online and then moving into large retail spaces, said Steven Laff, head of technology, Magic Beans, which sells baby gear and toys. "Retailers are getting it. The value of a Nordstrom-type experience is becoming an important differentiating marketing tool. The net result is customers are facing less of a hard sell in better-run stores, which creates an enhanced shopping experience. It is no longer true if a customer walks out the door empty handed that the sale is gone. They can easily buy the item online."

Some retailers remain conflicted about this dynamic, and store managers may believe online is cutting into their in-store profitability. "The wiser retailers have a different perspective. They see the value of nurturing the relationship between online and off-line sales channels; online brings sales to the company and also drives traffic to the brick-and-mortar stores. These changes make online uptime as critical as a physical location being open during normal business hours," Laff said.

But Magic Beans was the target of a distributed denial of service (DDoS) cyber attack on Black Friday, which it was able to stop in time. A DDoS attack attempts to make an online service unavailable by overwhelming it with traffic from multiple sources.

"They were clever enough to attack for only five minutes at a time, not long enough for the ISP to shut it down. But if the ISP did shut it down, the odds were terribly high they would be cutting off legitimate customer traffic along with the bad guys' traffic, which is a terrible option too," he said.

Until recently, security was a low priority for companies like Magic Beans, but the attack made clear the need for cyber protection, which the company obtained from Nexusguard. 

Attackers are now using bots to run attacks from multiple continents at once, said Shawn Marck, exec-VP of product at Nexusguard. "Hackers do these incidents for basic reasons: they are simply jerks, they want cash, or it's a bureaucratic/government retaliation issue."

Another problem with DDoS attacks is they can operate as a smokescreen for malware and other intrusions. "It acts as a Trojan Horse, where it distracts IT and then opens the door for another avenue to exploit. DDoS attacks are simple, yet they are becoming far more sophisticated, and companies need to understand they can operate as a 'first wave,' and can go on for months and months," Marck said.

Looking at two high-profile cyber security attacks, IT staff quit at Home Depot prior to the hacking incident, Marck said "because they saw a catastrophe in the making. At Target, there was so much data going through the system they didn't have the visibility to detect the problem."

As companies invest in reverse retailing and build the platforms, they need to understand it is not only a marketing function, Bhargava said. IT must be involved from the beginning. "Marketing is becoming more tech oriented. You're looking at a huge shift towards data and technology, with marketing using tech perhaps more than IT," he said.

It's also important for companies to understand the online experience is different from the past. "With an online storefront you need to have access to a real agent who is armed with up-to-date information. The tech underlying the online experience has changed, with a merge towards the marketing side. You have to understand the behaviors of shoppers and meet their specific needs through tech tools, and you must to do it quickly," Bhargava said.

For more:
-See this Influential Marketing Group blog post

Related stories:
Half of shoppers plan to webroom or showroom this holiday season
Tommy Hilfiger launches digital showroom
Deckers opens first brand showcase store, 'innovation lab' to boost omnichannel growth
Cyber attacks against retailers worsening
Cyber security affects consumer holiday spending