Cross-Channel Retailers Realize “Need For Speed” As They Get A Jump On Holiday Promos

The holiday season is shaping up to be a game of high-stakes poker played at high-speed. According to experts observing the situation, the key players may call “all in” at any time with an aggressive slate of discounts, promotions, and cross-channel incentives.

“The big change this year is that retailers are moving their holiday campaigns forward in an attempt to close some sales early,” says Chad White Director of Retail Insights and Editor-at-Large for the Email Experience Council. “As of Oct. 19, 40% of the retailers I track had referenced the holidays in at least one email. Last year only 31% of retailers had referenced the holidays by that point. Last year we didn’t reach the 40% mark until Oct. 25, so retailers have moved their holiday campaigns forward by roughly a week. Based on this, I expect Cyber Monday to be huge again this year as retailers give customers another compelling reason to pull the trigger and not wait until the days right before Christmas. I also expect more Black Friday messaging this year.”

Some retailers have tried to take the high road as the season approaches, but most analysts expect speed and even desperation to rule the rest of the year. Circuit City, for example, has drawn some positive press for its “One Price” policy that guarantees the same price regardless of the channel it’s purchased through. Best Buy has pushed its ramped up mobile offerings. OfficeMax (see related story) has taken up cause marketing. But expect these all to be footnotes on Dec. 26.

“It is the nature of the economy to turn all consumers toward value,” says Lauren Freeman president of the e-tailing Group. “Expect them to look for deals across all channels. They will look for early season deals, and then look for late season deals. In the middle I expect to see a lot of limited time type of promotions and accelerating discounts.”

Last year, the main cross-channel issue was free shipping. This year most retailers would kill for that kind of simplicity. Consumers expected retailers to ante up free shipping for most any order regardless of value. This year, free shipping has not been promoted as heavily by e-commerce pure plays or cross-channel retailers. But it’s a tactic that can and will be broken out at any time.

Larry Freed, president of ForeSee Results, was one of the analysts that accurately called out free shipping as a competitive key last year. This year he calls it “a cost of entry” for e-commerce. “I expect it to be very important again,” he says. “Actually it has become more of an accounting issue than a business issue. It’s really part of the cost of goods online, and we all know the margins are much better for online sales. I think when gas prices were higher the potential hit for free shipping for retailers was bigger. Gas has come down substantially, so I say that if you can get customer to pay for shipping, all the better. But if you can’t, there are a lot of ways to accomplish it.”

Freed agrees that free shipping is among the aggressive tactics that will simply depend on who blinks first. After Halloween, he says, the game is on. Even the total number of e-commerce revenue is up for debate. Several reports issued over the past week call that number into question. Both Forrester and the e-Tailing Group expect 2008 to settle for a 12% increase over 2007. “Although US consumers are pessimistic about the health of the economy, they expressed a marked interest in the ability of the Web to save them money,” states the Forrester report. 48% of consumers surveyed, compared with 41 % in 2007, said that they can find the best values and deals online. Additionally, 36% of consumers said that they would be more likely to shop online due to high gas prices, compared with 22% who expressed the same sentiment last year. Forrester expects that the majority of holiday online sales will be driven by shoppers who have previously purchased online, rather than first time online buyers.

Freed says he expects a drive in online advertising and promotions to drive more web traffic and consequentially more purchases than is currently predicted. Brand Keys last week issued a report that warned of a possible five percent decrease in overall retail revenue, including online, based on the changing needs and expectations of key consumer groups.

New Study Shows Simple Online Path To Purchases & Shopper Loyalty

Maybe one thing won’t be so tough this holiday season for retailers. A new report shows that simple web ads and loyal customers will be the main traffic drivers for both online and offline channels for the balance of this year.

That means that video ads and rich media applications, which are expensive and buzzworthy these days, may not need to drain retailer’s holiday ad budgets. The new report from from web analytics company iPerceptions collected user-generated feedback from over 14,000 visitors to leading media sites during the month of August 2008. The data showed retailers can reach consumers through text and banner ads most efficiently.

In fact, consumers visiting media sites are most likely to click on simple text ads (25% of respondents). Display ads follow in popularity, with 20% of respondents likely to click on right banners and 12% likely to click on top banners. Video ads are not very popular among most consumers; only 11% of consumers said they were likely to click on them. And tech-savvy 25- to 34 year-olds show no special affinity for video, being just as likely to click on video ads as text, right and top banners. The only consumers who seem to be engaged by video ads are under the age of 25, a group that accounts for nearly one-third of the video-ad viewing audience.

Jonathan Levitt, marketing VP for iPerceptions, believes some of the survey data goes deeper than affirming text and banners. “The voice of the customer can be expressed through web traffic,” says Levitt. “We suggest that rather than starting with the conversion rate or last click attribution that retailers find out why their customer arrived in the first place. They usually arrive with an intention. They have a task to complete and retailers need to know what that is.”

Brand value is still determined by experience at the retail website, not by the experience consumers have in getting there. The iPerceptions report showed that once arriving at a site, the key to brand value and sales is task completion. 67% of visitors who completed their primary purpose reported enhanced brand opinion (vs. only 18% for those who did not). 60% reported higher likelihood to purchase either online or offline (vs. 14%). Visitors who completed their primary purpose were two times as likely to refer a friend and two times as likely to make a repeat visit.

Just as loyalty can be doubled by understanding and completing the customer task and intention, the study also found that advertising clicks come from loyal audiences. In other words, users that are loyal to a media site, have a higher propensity to become loyal customers. 65% of consumers who are likely to click on ads are weekly or daily media site visitors. Only 15% of those likely to click on ads are first time visitors and only six percent of respondents were “sporadic” users.

Levitt believes the report shows that last click attribution, which has become something of a holy grail among internet marketers, may not be as important as once thought. In spring 2008 iPerceptions looked at first-time purchaser data for a top consumer electronics retailer. “We found major problems with the standard practice of last-click attribution,.” Says Levitt. While most purchasers were arriving organically (typing in the URL, bookmarking) or through search, the factors that most greatly influenced their decision to purchase suggested that offline vehicles deserved much more credit. Specifically, 30% indicated that their decision to buy online arose from word of mouth/credible referrals, 11% indicated that they bought as a result of a direct mail campaign, and 9% indicated that they were motivated by a print ad.

In a multi-channel retail study from April 08 through July 08 involving more than 10,000 respondents, iPerceptions found that, among visitors who did not execute a purchase online, 60% indicated that their website session had compelled them to visiting a brick-and-mortar store as the next step. “This represents a veritable army of potential buyers who were driven directly from the online storefront to the tactile storefront,” says Levitt.

AMR: Don’t Let the Early Predictions Lull You into an Unprepared State During the 2008 Holiday Season

Written by Debbie Hauss

While some of the forecasts indicate consumers are planning to spend about the same amount of money during holiday 2008 as they did in holiday 2007, retailers should be on the lookout for sudden shifts and changes. A presidential election, war, natural disasters, rising gas prices and the volatile current state of the economy should have all businesses on their toes.

“Retailers have to be prepared both for a normal shopping season and a highly abnormal one,” notes Janet Suleski, research director, retail at AMR Research. “Given the volatility in the stock market and uncertainty about the economy, I believe consumers can and will change their strategies very quickly as their personal situations warrant,” Suleski adds.

Additionally, if consumers take the advice of financial experts such as Suze Orman, they may decide to pull back on spending this year. In a recent appearance on Oprah Winfrey’s talk show, Orman asked consumers: "People, stop living the financial lies that you have been living. If you don't have the money to pay for something, can you just not buy it?”

To date, though, consumers appear to be planning a similar spending season to 2007. In a recent survey of 130 shoppers, AMR found that 73% of respondents are planning to spend the same amount in 2008 that they spent in 2007. That adds up to more than $900 per person, according to statistics from the National Retail Federation.

Agility Will Be Key
While retailers must prepare their marketing and promotional strategies well in advance of the holidays, recent technology improvements may help them adjust plans if necessary, says Suleski: “Retailers have gotten a lot more agile in the last five to 10 years, aided by better access to real-time information, better demand forecasting tools, and expanded collaboration with their suppliers. I am sure that many have “plan B” in place in case of an exceptionally difficult shopping season.”

Smart retailers will get a jump on promotional and sales activity to pull at consumers’ heart strings before they feel too much of a crunch. Wal-mart, for one, recently announced a price cut on specific toys and will open its holiday ornament and décor shops nationwide by October 10, Suleski reports. Many retailers also are taking precautions by limiting their inventory and beefing up assortment planning, she notes.

Internet intelligence A Must
No matter what the total spending number turns out to be, more consumers will be researching products and shopping online, and retailers need to be prepared for that reality. The AMR survey revealed that 26% of respondents plan to do more or a lot more shopping online in 2008 versus 2007, and 16% are doing so to avoid the spending money on gasoline to drive to stores.

But the competition will be fierce because consumers are shopping smarter. “Retailers’ strategies need to take search and price comparison websites into account and be very aware of how their key promotions stack up to the competition,” says Suleski. “59% of the shoppers we surveyed plan to use Google, Froogle, Yahoo, PriceGrabber, Shopzilla or other sites to locate the best deals for at least some of the items on their holiday shopping lists.”

Once consumers decide on a product, they need to know their product will be available when and where they choose — in some cases by shipping and in other cases by picking up their online purchase in a local brick-and-mortar store. “Those (retailers) who have developed strong cross channel integrated capabilities will be able to shift their inventory where the customer wants it,” says Kevin Stemeckert, research director, retail for AMR Research. “Order online/pickup in the store and other capabilities will also be helpful in increasing sales and capturing larger shares of the wallet.”

As retailers focus on consumers’ wants and needs, they are making better use of available technology. “The role of technology in satisfying shopper demand is increasing and will play a key role in the success retailers have in meeting consumers' needs this season,” adds Mike Griswold, VP and content lead, Retail at AMR. “Assortment planning, lifecycle pricing, and inventory management and visibility (particularly cross-channel visibility) technologies will play key roles in creating successful shopping experiences for consumers.”

Mystery Shopper Research Uncovers Improvements In Cross-Channel Marketing

By stepping out of the office and into the stores, the e-tailing group captures unique insights into successful retail marketing and merchandising practices. In the fourth year of its Cross-Channel Shopping Study, the e-commerce consulting firm found that retailers are more dedicated to shop online/pickup in-store and are moving towards improvements in other cross-channel areas such as in-store web tie-ins, buy online/return in-store and online store locators.

Researchers for the e-tailing group spent time in stores and online with more than 50 chosen retailers and has found a number that float to the top as successful cross-channel marketers:

• In-store pickup stars include Nordstrom, Sears and Circuit City. A recent entrant into the in-store pickup arena, Nordstrom is testing buy online/pickup in-store in apparel, shoes, and cosmetics to roll-out to all merchandise categories by September 2008. The retailer boasts online inventory of 83,000 SKUs and pickup in 159 stores across 28 states. Sears has been offering in-store pickup since 2003 and guarantees that if the customer does not get their package within five minutes of the in-store request, they get a $5 gift card, 10 minutes/$10 card, etc. Circuit City reports that more than 50 percent of 2007 online shoppers picked up in-store

• Store associates lift sales. Sales associates can make or break the shopping experience. Those that are knowledgeable about the products and cross-channel opportunities for consumers will boost the bottom line. Retailers employing some of the best sales associates include: Apple, Bass Pro Shops, Best Buy, Crate & Barrel, Finish Line, Orvis, RadioShack and Ritz Camera. In each case the associate was friendly, eager to help and knowledgeable. In many cases shoppers were greeted at the door.

• Multi-media features improve web site rating. While store associates augment the shopper experience in the brick-and-mortar channel, interactive and educational features make the experience more enjoyable online. Orvis, Pottery Barn and pets.com are among the retailers cited by the e-tailing group for successful use of online video. Orvis, a fishing specialist, offers “Hook TV” as well as “The Beginner’s Corner” and a live chat feature. Pottery Barn provides design tips at “Stylehouse” and houses a video library showing products in use at home. Consumers who visit pets.com can view pet care videos and expert advice.

• A plethora of product information helps sell merchandise effectively at Patagonia, Ritz Camera and Williams-Sonoma. The key to providing a lot of product information is presenting it efficiently and in an easy-to-read format. Patagonia lists the essential item information clearly at the top of the product page and displays graphics to the left. Customers are able to opt for buying or saving the item mid-page. Ritz Camera incorporates tabbed sections to clearly delineate product features. Williams-Sonoma displays product information to the left of item photos and uses bulleted lists for simplification.

• Cross-channel marketing leaders are successful for a variety of reasons but in particular because they promote across all channels. Babies “R” Us provides online postings for in-store events, sign-up for the Birthday Club and access to job openings. Borders offers a cross-channel rewards program, book promotions, and promotes the online experience at in-store cash registers. Linens ‘N Things has an online gift registry, promotes shop LNT.com anytime and displays in-store signage promoting “as seen on TV” and “as advertised” in other channels.

Other stand-out retailers include: Apple, Barnes & Noble and Crate & Barrel for their online retail locators; and Petco, Brookstone, Sears and Target for their merchandising and mapping within locators.

In the report, the e-tailing group lays out statistics for key trends including in-store pickup, product research online and in-store, online product information availability, use and effectiveness of cross-promotions, retail locator rankings, online order process, merchandise checkout practices, and more.

For more information including a list of surveyed merchants or to order the report visit the e-tailing group's web site at: www.e-tailing.com

Reality Bites: Retailers Need Cross-Channel Tools To Overcome Bleak Holiday Outlook

By John Gaffney

Several research reports released last week showed the undeniable reality check that awaits retailers this holiday season. Most merchants will be faced with the slowest sales growth since 1991. In order to remain solvent and competitive beyond this critical further quarter period, analysts stress retailers must get closer to their customers by adopting online tools and analytics capabilities.

The bad news about holiday sales predictions came from several fronts. TNS/Retail Forward estimated that retail sales this November and December will increase just 1.5%. Deloitte was a bit more optimistic, predicting a 2.5% to 3% increase. That would make the 2008 holiday season the worst for retailers since 1991. However, it is also not a sharp drop taken on an annual basis. Deloitte says holiday sales hit a 10-year high in 2005, surging 7%. In 2006, sales rose 3.8%, and last year, they were up 2.7%.

TNS senior economist Frank Badillo said that the economy is the culprit and will push consumer spending toward discount and mass retail. “Our top-line forecast separates into two distinct groups—the leaders and the laggards,” Badillo states. “Sustaining above-average growth will be non-store and mass retailers. They will see combined growth near 6.0% in the fourth quarter. Continuing to troll the depths will be the homegoods and softgoods retailers where growth is expected to decline 1% or more.”

In recent years, e-commerce has come to the rescue providing double-digit growth for retailers that were suffering offline. But that growth may not be so easy to come by this year either. A new report from Shop.org and Forrester Research shows “cautious optimism” among its members. The 25% growth rate predicted earlier this year may still be reachable from some companies the report says, but specific growth rates were noticeably absent.

About one-third (35%) of online retailers surveyed said they expect their online business to perform better than expected in the next 12 months, while another third (33%) anticipate their online business will perform the same as expected.. According to the report, 81% of online retailers surveyed reported that their eCommerce business was profitable in 2007, and 75% were also more profitable last year than in 2006. Almost half (49%) of online retailers said that their average conversion rate in 2007 was higher than in 2006, and that 36% of total sales for the online retailers were driven by repeat customers—higher than in 2006. However, due to their outlook for the US economy, 37% of survey respondents noted that they’ve lowered their expectations for their online business performance in the next 12 months.

The report also issued something of a profit warning: “Retailers must still execute well to capture possible sales. Additionally, it cautions that those sales may not necessarily be the highest-margin revenue due to increased input costs and the pressure to offer promotions such as free shipping,” it said.

THE NEW PLAYBOOK
For retailers looking for a way to combat these new realities, Aberdeen Group released a new research report focused on the strategies necessary for driving holiday business. The Aberdeen study, released just days before the slew of bad news on Wall Street, showed that “Best-in-Class companies optimally manage merchandise, customers, and data as key determinants for driving successful holiday business.” On average at least 50% of the Best-in-Class respondents focus on customer-facing and back-end technology tools that support online channel sales as e-commerce becomes more significant for topline gains during peak selling seasons, according to Aberdeen.

The data from the report, “The Complete Mantra for Driving Holiday Business in 2008, 2009 and Beyond,” shows that 55% of leading retailers see the need to counter competitive selling strategies as the top holiday pressure. To try and outpace their competitors, 50% of leading retailers are using such advanced online tools as search and comparative shopping tools, dynamic web content management, online analytics, and social marketing tools.

The report showed a fairly big divide between the Best-in-Class companies from the rest of the pack in terms of their approach to planning and measuring the key holiday period. 70% of Best-in-Class companies utilize standardized metrics to measure Holiday performance effectiveness versus 41% of Average and 33% of Laggard companies. Accordingly, a critical enabler for managing seasonal selling is the ability to measure key associated metrics like sales comp, product margin erosion, cost to serve, and total cost of goods sold, the report found.

The top action for holiday selling optimization was developing loyalty programs, which topped the list of best-in-class respondents. 40% said they were consistently evaluating commerce infrastructure to accomplish loyalty and analytics goals. The need for technology and infrastructure is driven by the increasing complexity of e-commerce applications, as well as increased cross-channel sales. Product inventory and customer data must be managed across- channels in order to drive customer loyalty for the future and maximize sales for the short term.

“These content-rich, immersive sites are compelling, but require more bandwidth than standard, static pages,” said Aberdeen senior analyst Ben Ream. “Leading retailers are taking a preemptive approach, and measuring system capacity against site application demands."

Circuit City Grabs An EDGE By Incorporating Multi-Channel Intelligence Into Tablet PCs

Looking to improve the shopping experience and stand apart from its competitors, Circuit City is betting a lot of its future on its new ‘the city’ format. And one of the key differentiators for the new format will be the Enhanced Digital Guide Experience (EDGE), a handheld selling tool designed by the retailer and Microsoft. Delivered on Tablet PCs running a custom Windows-based application designed to help inform and engage customers.

While the EDGE initiative clearly comes to life on the sales floor, Dave Romero, senior manager of new concepts for Circuit City, points out that the strategy is anchored in a multi-channel approach. “[EDGE] allows full access to all the reviews on our Web site,” says Romero. “It’s a terrific multi-channel tool that combines all the great power and information on our Web site and all of the great information around products and details. And it combines the guest reviews on our site, and puts it all in the hands of [associates].”

After two years of testing, learning and iterating in multiple markets, Circuit City began using Table PCs running the EDGE application in all of its new-format ‘city’ stores and is already enjoying positive results. Sales associates are more confident in approaching customers with the knowledge to sell or discuss any product in the store. The mobile tool is integrated with online content for a seamless multichannel experience.

EDGE is designed to extract product information, inventory data, in-store promotion, third-party reviews, and other information over the Internet and from multiple back-end business systems. Once the information is extracted, EDGE is then optimized with decision-support intelligence and friendly user interface.

“We knew we had to create a more consistent approach to how we engaged guests in our stores, and Microsoft had the insight to show us where the industry was heading and provided knowledge and resources to move us in that direction,” says Romero, senior manager of new concepts for Circuit City. “We hadn’t seen anyone before bring together guided selling components (questions and answers) in addition to learning content.”

The EDGE technology is designed to speed the sales process by providing associates with immediate access to product recommendations, demos, usage questions, competitive pricing and other information for thousands of items across hundreds of categories.

The EDGE offers a series of guided selling questions and answers that are based on popular features of products. For example, if a shopper is in the market for a new TV, the EDGE will give the store associate a series of five-six questions to refine search. By providing answers, the EDGE offers a manageable list for shoppers to compare features and prices.

Once a shopper comes to a decision on the product they want to purchase, the EDGE prints out necessary information on the product, which can then be scanned in at the POS. Though the EDGE is not completely integrated with tendering system, it is a program Circuit City is currently working on as part of a new POS rollout, according to Romero.

“We try to avoid that ‘not-my-department’ scenario that can happen with other retailers,” says Romero. “Within retail things change very quickly, especially in our space, so we wanted to have the [city] store be something we could grow and flex with over time.”

In addition to remedying the reluctance store associates had to approach customers, Romero says the “Google it” mentality has a strong tie to the EDGE concept. “You’ve got to be able to look at the generation of the folks out there who have been raised on Google and appreciate that, and say, hey, ‘it’s okay to look up products and information over the Internet and share that with your guests and make sure they get you the right one and use the guided selling solution to get there.”

With a wealth of information now at store associates’ fingertips, Circuit City can hire from a broader talent pool and prepare them for the sales floor more quickly, according to Brian Leach, vice president of new concepts for Circuit City. The new hiring strategy has enabled the company to expand its hiring pool seeking friendly associates with strong team-building and communication skills, rather than searching exclusively for highly technical associates.

“We’ve done a lot of guest research with their perception of the device and how it’s changed their shopping patterns and habits… [Response] has been overwhelmingly positive,” Romero says. “Our guests really appreciate having access to the information.”

Brand Keys CEO: Gap’s Soft Comp Store Sales Indicative Of Wider Branding, Cross-Channel Failures

By John Gaffney, Senior Analyst

Gap Inc. posting an 11% same store sales drop for the month of July wasn’t a huge shock to retail industry watchers, but one analyst in particularly has been extremely vocal that the dip points to much larger problems for the chain.

“The chain, which has been in a death-spiral of same-store sales for as long as we can remember, is opting to leverage a trend we identified quite some time ago: customization,” says Robert Passikoff, CEO of Brand Keys. “The Gap has fallen into this version of customization that should be presented more in-store through the product and the experience, but it’s not,” he says. “They’re giving us dramatic photos of actors we don’t know and expecting to reach sophisticated customers that way. And this is supposed to be the fashion attempt of the year. They have the same stuff with better photography. That’s all.”

Who is Robert Passikoff and why is he saying all these nasty things about Gap? No he’s not a disgruntled customer or bitter blogger. Passikoff is a market research expert, author, and CEO of branding consultancy Brand Keys. He has found in Gap a consistent problem that he believes pervades most retailers today as they work to embrace the cross-channel customer. Offline brands have failed to differentiate, he says, and cross-channel brands have failed to innovate. Both will be necessary to profit over the next year, according to Passikoff.

Passikoff’s provocations are based in data. The Gap ranked last among apparel specialty retailers Brand Keys’ Customer Engagement Index released earlier this year, behind Victoria’s Secret, American Apparel, J. Crew and others. The Gap is just Passikoff’s current poster child for ineffective branding. He has taken Microsoft, GM, and T-Mobile to task in the past. His current retail favorites are Victoria’s Secret, Nike, and Adidas.

“They deliver a seamless sense of what the brand stands for online and offline,” he says. “They allow customers to connect their own personalities to the product. They differentiate themselves and still they resonate with some value. All this combined with some buzz makes an effective cross-channel retail brand.”

After following retail brands as well as other verticals for three decades, Passikoff is surprised by the current comeback of the focus on the in-store shopping experience and in-store merchandising. Just a year ago he believed the online experience would become more important. It still is important to the brand, he says, but in-store is where customer expectations and satisfaction are bred.

Back to Gap, which has cut costs and tried to move the focus online. Passikoff says it’s not enough. He admits the retailer has done some good work to become more cross-channel focused, but same store sales are unfortunately a dominant metric. “It would be great if we could all focus on cross-channel results but it’s simply not what Wall St. looks at,” he says. “Until we find a new way to keep score, same store results will dominate.”