Who Will Be Brave Enough To Become A True Merged Channel Retailer?

Magnus Gustafsson is a marketing executive with a very clear mission.

As VP of direct marketing for Aerosoles, he uses the chain's more than 250 Aerosoles stores and thousands of department and specialty store partners to push one form of apparel?shoes?and to only form of customers: women. The chain recently kicked off their men's shoe products as ill-fitting.

But as focused as Gustafsson is, he admits that his chain?as well as the vast majority of retailers out there?have a lot of growing to do to truly become a multi-channel retailer.

In talking with lots of retail marketing and IT execs recently, there appears to be this growing realization?concession??that a true multi-channel approach is a shock to the retail system. Indeed, even the word "multi-channel" sends the wrong message. Isn?t that the opposite of the true goal? Perhaps the phrase "merged channels" is closer, with "multi-channel" usually a pseudonym for what Google's head of retailing has dubbed "multi-silo-ed."

So I asked Gustafsson what a true merged channel retail environment would need and the conversation turned to incentives and organization. What do retailers measure versus what should retailers measure? In a typical chain, credit for sales made is based on one simple measurement: Where was the purchase consummated?

Consider a customer who spends hours online evaluating products and making comparisons and then finally decides to buy. That customer drives five minutes to the local brick-and-mortar store of that Web site's chain and buys the item. In terms of credit (and bonuses and staffing and all of those other goodies), who made that sale?

If a brick-and-mortar location identified customers as soon as they entered the store and then tracked them through the aisles, they might make a guess as to motivation.

Did the customer make a beeline right for aisle 9, grab the blue widget and take it immediately to checkout lane six? If so, it?s hard to dispute that the purchase decision was likely made before that customer walked into the store. Did they receive a new catalogue yesterday? Had they asked anything of the call center this morning? Any visits to the Web site recently?

A true merged channel retailer would use technology tools in all of their channels to analyze such data. Management could then make proper decisions about personnel rewards, staffing requests and?most critically?they'd truly know where their sales were coming from.

But do they? Does Aerosole? Not by a longshot. "A lot of retailers look at where the sale happens because that's the easy part to identify," Gustafsson said. "It's not easy, but it's easier."

There are two sides to becoming a true merged channel retailer: the customer experience side; and the retailer's view. Put another way, there are two entirely distinct battles to be fought. The "retailer's view" side is where a wide range of tools are used to analyze what is going on today across all of the retailers' channels?as in the monitored customer described above. Done properly, the customer will never even be aware of these sophisticated changes.

The customer experience is the opposite. The retailer should see very little change, but the customer will see everything differently. The Borders announcement in March that it would sever its partnership with Amazon and revamp its stores is an excellent example of an attempt at radically adjusting the customer experience.

One chain executive described a scenario where a customer wanting books about visiting Hawaii would come into the store. Instead of just finding books on that island paradise, the travel section would provide all of the services needed by someone considering a trip. When the customer went to checkout, they might be handed four books, two plane tickets and a hotel reservation printout, aided by in-store kiosks connected to not only Borders' web site but to partners as well.

Whether Borders will ultimately realize that vision is unknown. And if it does realize it, the success of the plan may have little to do with the execution. Perhaps pricing issues and having stores in the wrong locations could hamper their efforts. If so, I would hope the industry would be sophisticated enough to look at the reasons for a success or failure and not condemn an aggressive merged channel effort.

Unfortunately, history suggests that businesses often learn the wrong lessons from successes and failures. Making matters worse is that the retailers who are most likely to take the merged channel plunge most enthusiastically are the ones who have been faring poorly on their own. Let's face it. A retail chain that is pulling in strong profits, great growth, happy investors and a more than satisfactory marketshare is unlikely to agree to radical changes.

Statistically, that means that the brave souls who do will likely have multiple burdens to overcome. A merged channel strategy might be expensive to deploy initially, but it's going to prove to be the most effective over time in attracting and retaining customers and, on the back end, letting management make the best decisions about resources.

But like any experienced show buyer knows, the best-fitting shoe will almost always?in the beginning?hurt an awful lot.