Special Edition: Shop.org and Macy's

In case you didn't hear, Macy's announced at Shop.org that every dollar spent online influences $5.77 in stores.

Multichannel advocates from near and far raised their glasses in celebration. Or at least that's what appeared to happen. You tweeted me, asking for my thoughts, in some cases, asking me to refute the knowledge offered by Macy's. I'll oblige.

I was at Nordstrom in 2003 when we first estimated the dollar amount that our website drove to our full-line stores. It was in 2005 when we further validated this point, doubling our online marketing budget and killing our catalog business and growing online sales and growing comp store sales all at the same time, a feat that I thought would be nearly impossible, a career-changing outcome. It was in 2006 when we used Multichannel Forensics to demonstrate to the Executive team that when you acquire an online customer, the customer becomes a store customer and then becomes a loyal store customer, helping the multichannel leaders in the company use the information to fuel their multichannel integration initiatives.

So do not be surprised when you hear a statistic like this. This kind of stuff has been documented by companies for some time.

But do pay CLOSE ATTENTION to the language used.

One dollar online "influences" $5.77 in stores.

Unless the Shop.org blog is mis-stating something, the choice of the word "influence" is critically important.

There is a fundamental difference between "influence" and "proven to drive incremental profit". When I worked at Nordstrom, we knew how much incremental store volume would disappear if we shut down the website, and we knew how much store volume was simply tied to a customer visiting the website and browsing in the days prior to a retail purchase.

Both components are valuable.

Both metrics demonstrate the need to have a modern e-commerce website and quality online marketing efforts and retail marketing activities and store merchandising strategies and a social media experience.

But do not, for one minute, confuse what the word "influence" means. "Influence" does not result in profit.

Have you ever read a statement like "Our new mannequins influenced a hundred million dollars in sales?"

Have you ever read a statement like "Our new wooden hangers influenced two hundred million dollars in sales?"

Have you ever read a statement like "The copy on the price tag influenced three hundred million dollars in sales?"

Of course you haven't heard those statements. But without a doubt, the mannequins and wooden hangers and price tags influence sales, don't they? They don't cause sales, they do influence sales.

And then there's the story of debt.

Retail is a voracious beast that is fueled by debt. The e-commerce channel has no choice but to fuel retail, from the strategic viewpoint of a retail executive team.

Macy's is blessed with an almost hopeless $8,600,000,000 of long-term debt. Have you ever had to manage the crippling weight of $8.6 billion in long-term debt? Last year alone, interest expense was $588,000,000. That's $588 million dollars ... of interest expense.

During the past three years (including the two years prior to the collapse of the economy), Macy's lost $2,800,000,000 profit, and paid $1,600,000,000 in interest payments.

Think about that. How much damage could $1,600,000,000 of incremental online infrastructure investment and/or online marketing have done, both online and in stores? All of that money, instead, was sent to a bank.

So let's temper enthusiasm about the role of a website within a retail brand with a simple metric, a simple "KPI" to use the parlance of the day: During the past three and a half years, the success generated by a website that influences $5.77 of retail sales for every $1 online resulted in a total loss of nearly $2,900,000,000, and significant comp store sales decreases. If the website were truly driving such stellar incremental volume to the stores, wouldn't there be some positive motion in comp store sales results during this timeframe?

Without a doubt, e-commerce, and websites in general, significantly, dramatically influence sales. We have no choice but to offer the customer an outstanding experience. And Macy's deserves to crow about this metric, it's a wonderful finding, a validation of something that people instinctively knew but couldn't prove.

But do not, for one minute, assume that "influence" translates to profit. Or even comp store sales increases. You can invest a ton of money in a perfect online experience, please customers, and not see one penny in incremental sales increases in your retail stores.

Keep this information in mind when your favorite vendor calls you, asking you to invest in e-commerce solutions, using Macy's as a poster child for multichannel integration.

Feds Set To Bail Out MineThatData

Washington, DC: In an unprecedented move, The Federal Reserve Board announced this evening that it will, for the first time ever, bail out a highly profitable sole proprietorship.

Seattle based MineThatData, a consultancy that helps CEOs understand the complex relationship between customers, advertising, product, brands and channels, will be the recipient of nearly $300,000,000 of free money, courtesy of an unprecedented taxpayer bailout.

"It's only one dollar per person living in the United States" groaned a noticeably exhausted Treasury Secretary Henry Paulson. "We just finished taking ownership of AIG, and now we're faced with having to bail out a highly profitable sole proprietorship. Where does this end?"

The announcement was met with an enthusiastic roar of approval at the Shop.org Annual Summit in Las Vegas. Attendee Maya Pemberton, Sr. Pay-Per-Click Analyst at Dell, told anybody who would listen that the announcement provides much-needed stability in the emerging field of Multichannel Forensics.

"We just realized that our online customers were in hybrid/transfer mode, rapidly migrating to our retail offering at Wal-Mart. We couldn't possibly take our strategy to the next level without assistance from the Feds." mentioned Pemberton, who then ran her badge under the bar code scanner at a social media vendor in the exhibition hall, earning her a free ballpoint pen and a chance to win an iPod shuffle.

Wall St. did not react positively to the announcement, with the Dow Jones Industrial Index plummeting 1.4% in after hours trading. We were unable to solicit a comment from management at MineThatData.

Note: Various, if not all elements of this story, have been fabricated. No taxpayers were harmed in the writing of this story.

My Keynote Address At The Shop.org Annual Summit

In the tradition of an earlier speech, I bring you My Keynote Address At The Shop.org Annual Summit.


Good morning everybody! Please, please, sit down! What a pleasure it is to be here with you on another glorious September morning in Las Vegas, to see so many familiar faces. If there is one way that this conference changed over the years, it is in the number of familiar faces I see as I look across the room. Six years ago, this was a much smaller group of individuals who were largely creating a new channel. There was a vibe in the room! Today, this is a large group of inter-connected, multichannel individuals. Our websites are now part of a large ecosystem. Online retailing is a mature industry.

I'm seldom asked to speak at industry events. My message is often contrary to the programmed message of best practices that conference organizers want for you to hear. The fact that Shop.org is willing to consider all points of view is refreshing. I thank the organizers of this conference for the opportunity to share a different point of view.

Today, I am going to share a different point of view. We're going to consider the topic of "dependence".

Allow me to ask you a few questions. In the spirit of other sessions at this conference, I'll title my mini-series "ELEVEN QUESTIONS EVERY ONLINE RETAILER MUST EFFECTIVELY ANSWER TO REMAIN RELEVANT".

Question #1: What would happen to online sales if Google were to not be available for customers to use for just one month?

Question #2: What would happen to online sales if Comcast or any cable giant were to not provide high speed internet access for just one month?

Question #3: What would happen to online sales if nobody had access to a television, radio, newspaper, or any other form of traditional media for just one month?

Question #4: What would happen to online sales if the post office could not mail catalogs for just one month due to another anthrax threat?

Question #5: What would happen to online sales if every retail store in the United States were forced to close one day a week to conserve energy?

Question #6: What would happen to online sales if it became too expensive for the USPS, UPS or FedEx to deliver packages to our homes in a timely manner?

Question #7: What would happen to online sales if a worm or computer virus made it impossible for folks to use Microsoft Outlook to receive e-mail marketing messages for just one month?

Question #8: What would happen to online sales if every information technology expert went on strike, refusing to maintain our e-commerce enabled websites for thirty days in protest of our best practice of outsourcing technology labor overseas?

Question #9: What would happen to online sales if we were forced to close our distribution centers, call centers, and live chat centers for one day each week to conserve energy?

Question #10: What would happen to online sales if a vocal minority of social media users decided to try to sink us with negative publicity?

Question #11: What would happen to online sales if eco-friendly organizations decided that online retailing burned too much coal to power too many servers, causing rampant pollution and accelerated global warming?


We've heard an awful lot about best practices over the past two days. We've learned a lot of useful tips that, for the most part, will cause online and offline sales to increase if applied properly.

We didn't talk much about how dependent we are on others for our success. Online retailing is a wonderfully flawed concept, one that demands perfection from innumerable individuals and organizations for the online marketer to experience success.

Back in 2005, I spoke with an individual who told me that he was "so pleased to be part of a three-team person that built an entire e-commerce business". I said "Oh really? Did you not depend on the information technology staff to write the code necessary to enable a website to run properly? Did you not depend on an existing catalog call center to field calls from confused customers who did not understand product because of faulty website creative and imagery? Did you not depend on offline advertising to drive customers to your website? Did you not depend on a person in the Midwest working on a Sunday morning to pick, pack, and ship merchandise to your customer? Did you not depend on a store merchant to pick products that store customers would love, products she thought your online customer would also love? Did you not depend on an inventory manager who knew exactly how many items to buy based on prior customer demand across all channels? Did you not depend on a well executed e-mail marketing program to drive customers online? Did you not depend on inexpensive internet access to even allow a customer to place an order? Did you not depend on a store employee in Richmond telling the customer to visit the website for a broader assortment of merchandise? Did you not depend on a disruptive business model named Google to drive random traffic to your site, traffic that you got credit for even though you did nothing to earn it?"

I observe this style of dependence in my own business. Google sends fifty-six visitors a day to my blog, a blog that is hosted on Google servers, a blog that is generated using software from Google. I analyze my visitors using web analytics software provided by Google. My RSS feed is converted to one that is easier to maintain --- the company that provides this service is owned by Google.

What do you think would happen to my blog, my business, if something happened to Google?

What do you think would happen to your business if something happened to Google, or to any of the individuals, organizations, or offline advertising techniques mentioned earlier?

See, we blindly pursued this multichannel thing with such zeal that we never really asked ourselves fundamental questions about the online retail businesses we were building. Maybe it is the right thing for me, as a leader, to depend on a community of followers on Facebook to evangelize my brand for me. Maybe it is right for me, as a leader, to depend on Google for twenty-five percent of my traffic.

But what if it isn't the right thing for me to outsource every aspect of my online retailing business to somebody else?

Honestly, if you strip away traditional advertising and direct marketing, if you strip away the overbearing influence of Google, if you strip away the sales that a retail store generates for you, if you strip away the social media pap that simply replaces the water cooler conversations of the 1990s, what do you as an online retailing leader actually control from a sales generation standpoint? What percentage of your annual sales are truly generated because of you, because of the strategies you employ? Have you ever gone through this exercise, decomposing your online business, measuring your true impact to the organization?

A true rainmaker is able to generate incremental sales, sales that would not have happened without the unique skills of the rainmaker. Take a moment, and look at the individuals in this room. How many individuals in this room have achieved "rainmaker" status? In how many cases can you find an individual who, if the individual didn't exist, would cause online sales to decrease by maybe ten to forty percent?

This is our challenge. Online sales won't continue to increase forever. In fact, many folks have told me that they are experiencing, for the first time ever, online sales decreases. These individuals want to know what they can do to reverse this trend. They've followed the advice offered at conferences like this one, implementing best practices, becoming "multichannel". And yet online sales are decreasing. Now what? What does the online marketer, the individual who has only known fifteen years of sales increases, do when online sales finally decrease?

Over the next decade, our challenge is to find unique ways to generate demand, methods that are not dependent upon traditional offline advertising, methods that are not dependent upon Google. Our customers and prospects must want to visit our websites without the aid of offline tactics or external traffic sources like MSN or Yahoo!. Our survival depends on providing an experience that gives the customer more than she expected, more than a simple multichannel experience that allows her to place an order in a retail store.

Are we, the folks in this room, ready to provide the customer with this experience? I am optimistic that we can do this as some point in the future. We need to get ready today for the challenges that we'll all face tomorrow.

Thank you for your attention this morning! Are there any questions?

Oh Oh, Multichannel Customers May Not Be So Great ... Or Plentiful?

Online, catalog and retail trade journals (as well as industry conference speakers, vendors, and assorted industry leaders) have been telling us for nearly a decade that we must be "multichannel" retailers, or risk extinction.

So the folks who chose to listen to this advice must be thrilled to learn that research from 1,090 survey respondents indicate that multichannel customers are not necessarily the most loyal or profitable customers. I found the article via the Shop.org Smartbrief, a free and interesting daily e-mail summarizing news in the online marketing world.

Wonderful!

And then Experian tells us that only 10% of customers are true multichannel customers.

Wonderful!

I've become Frustrated. Exasperated. Agitated. Irritated. Irked. Miffed. Why wasn't the research conducted prior to the series of decade-long lectures from industry leaders suggesting that we all "had to be multichannel"?

ACCM Conference: Your Story

Back in the early 1990s, there was no better way to gauge the vibe in the catalog industry than to attend the Catalog Conference.

Of course, the internet changed everything. The Catalog Conference became the ACCM, trying to hold on to both the hipsters working on e-commerce and the catalog establishment.

The hipsters fled to Shop.org. Shop.org had "the vibe" for awhile.

Then the hipsters fled to Web 2.0 and Blogging conferences. That was fun for about a year, then the hipsters fled to conferences about Facebook, and this year, everybody's a-twitter about Twitter. Who knows where the hipsters will go next month? Who even cares anymore?

So this year, I'm going back to ACCM after a six year absence. The conference organizers were kind enough to accept my application for a press pass, so I plan on doing something useful with the opportunity.

Of course, I'll accept invitations to meet with you about past, current, and future Multichannel Forensics projects. Send me an e-mail, and we'll set up time to meet on Tuesday, May 20 to chat about a Multichannel Forensics project.

I'll also have a limited number of copies of "Hillstrom's Multichannel Secrets" (pictured above) and "Hillstrom's Multichannel Forensics" to give away.

But most important is "your story". I plan on profiling several catalog executives and leaders at the conference, seeking to communicate "your story", describing to our audience what it is like to be a multichannel leader in the era of third-party opt-out engines, e-commerce, ecological disdain for the industry, outsourced databases and circulation, web 9.3, social media, co-op databases, matchback analytics, and falling response rates.

If you want to set up time to tell me "your story", send me an e-mail. I will be available all day May 20, and in the morning on May 21.

Hologram Marketing and Multichannel Marketing in 2015

A loyal reader sent us this article about Target using Hologram Marketing.

Fast forward to 2015, when we'll read an article that goes something like this:


NEW RESEARCH INDICATES THAT E-COMMERCE AND HOLOGRAM MARKETING WORK TOGETHER TO FACILITATE THE OPTIMAL CUSTOMER MULTICHANNEL EXPERIENCE

October 29, 2015: A new study, commissioned by Google, Yahoo!, Shop.org, Marketing Sherpa, Forrester Research, E-Tailer and Internet Retailer indicates that "multichannel customers", customers who shop via e-mail marketing, paid search marketing, website research, social media, e-commerce and hologram marketing, are five times more valuable than customers shopping via just the hologram marketing channel.

"These results validate what we've been preaching to clients since the early days of hologram marketing ... you simply cannot dive headfirst into hologram marketing without realizing that the customer demands a multichannel experience." stated Leonard Thigginsworth, President of Shop.org, the venerable e-commerce advocacy firm. "Firms that fail to tightly integrate the world of e-commerce with the benefits of hologram marketing are unlikely to thrive in this hyper competitive marketplace. Furthermore, the suggestion that today's experienced online marketers will soon be standing in soup lines is simply premature. Online marketing skills are essential in this highly complicated age of hologram marketing." concluded Thigginsworth.

The study indicated that 61% of customers were "very likely", "likely", or "somewhat likely" to use old fashioned tools like Google and Yahoo! to search for products and services. These customers indicated that they spent 5.3 times as much money on hologram marketing as did customers who abandoned e-commerce in favor of hologram marketing technology from "Holo", the San Jose based brand that utterly disrupted e-commerce in 2013 with innovative "personal holograms" that manage everyday consumer tasks via simple voice commands.

39% of survey respondents said that they were "very likely", "likely", or "somewhat likely" to use promotional e-mail campaigns to facilitate searches on Google or Yahoo!, searches that resulted in customers researching products and services on old-fashioned e-commerce websites, before ultimately giving purchase instructions to their personal hologram.

Darren Manning, President of Internet Retailer, believes these results validate the need for a holistic multichannel customer shopping experience. "We all know that late at night, shoppers wearing pajamas, sitting in front of the fireplace, love to hold their notebook computers on their lap, reading promotional e-mail campaigns and researching products and services in the friendly, safe and encrypted blanket known as e-commerce. This behavior simply isn't going to change because a startup company creates a personal hologram who does menial tasks and chores for you." stated Mr. Manning.

"In addition, do you trust handing over your credit card number or thumbprint to a hologram? I don't! I trust the encrypted environment offered by e-commerce." added Mr. Manning.

The study is good news for Google, a beleaguered old-school brand who lost a third of their search market share to Holo during the past thirty six months, resulting in an 80% drop in share price.

The study is also good news for online advocacy organization Shop.org, which is struggling to stay in business in this ultra-competitive marketplace. "We strongly believe that multichannel marketing is best experienced when customers use a combination of e-mail marketing, paid search, and e-commerce websites to research products and services. Traditional e-commerce-based research drives purchases via tools such as Holo. Research indicates that up to 80% of purchases via Holo are driven by e-mail marketing, paid search marketing, and e-commerce websites. Multichannel marketing, e-mail marketing, and paid search are here to stay. Take away e-commerce, and you take away the e-commerce potential of Holo" stated Ben Morrison, President of Shop.org.

Still, there are fundamental changes in customer behavior being exhibited by "Generation Z", 13-25 year olds who are children of the non-descript "Generation X" cohort of consumers. A recent study commissioned by Holo indicated that only 7% of these consumers subscribe to e-mail marketing programs, or use paid search.

"We believe that when Generation Z become full-fledged members of the "participation economy", (a phrase jointly coined by President Jeb Bush and Speaker of the House Michael Moore), they will appreciate and fully utilize the myriad of benefits offered by a multichannel marketing experience that tightly integrates e-mail marketing, paid search, social media, e-commerce and hologram marketing." stated recently appointed Marketing Sherpa President Sarah Rogers.

Self Actualization And Tribes

My inbox is full of excited colleagues getting revved-up for next month's Shop.org conference in Las Vegas. The online "third" of the multichannel marketing world really seem to enjoy this annual opportunity to hear great speakers, to network with colleagues, to learn.

If only employees could get this excited about projects within their own company.

Somewhere during the past twelve years, the world of multichannel business changed.

In sports, it is the performance of "the team" that matters. Athletes strive to win the Super Bowl, or World Series. Everybody shares equally in such an accomplishment.

The accomplishment is analogous to something Maslow called "Self Actualization". You're not at the top of your game if you go to the All-Star game. You're at the top if your team wins the World Series.

In multichannel business, we're in the process of "joining tribes". You might be the e-mail director at a multichannel retailer. One might think your "tribe" includes the department you manage, or the executive team you support.

Increasingly, your "tribe" includes e-mail analysts, directors, and VPs at other companies. You look to these folks for affirmation.

Each tribe develops their own communication style, identifies what is important for that tribe.

If you're part of the e-mail tribe, the important things might be subject line testing, spam filters, html, Outlook 2007 rendering issues, segmentation, personalization, CheetahMail.

If you're part of the paid search tribe, the important topics might be branded vs. non-branded search terms, static urls, page rank, whitehat, keywords, RKG Group, Google, Yahoo!, MSN.

If you're part of the web analytics tribe, you might focus on tags, kpis, conversion rate, landing pages, unique visitors, bounce rates, Omniture, Coremetrics.

If you're part of the business intelligence tribe, you talk about SAS, Business Objects, Microstrategy, cubes, KPIs, lifetime value, regression models.

If you're part of the catalog tribe, you talk about matchbacks, DMPC, RFM, Response, AOS, Dollar per Book, USPS, digital printing, merge/purge, housefile names, Abacus and ChannelView, 38 pound paper, perfect bound vs. saddle-stitched.

Each tribe hosts their own conferences. Each tribe touts experts who are revered. Each tribe deals with controversy. Each tribe advances their own agenda for improving the sales of the businesses each tribe member represents.

Tribe members freely share trade secrets (even on public forums and blogs) that, if their companies knew they were sharing them, would provide grounds for dismissal.

Within the tribe, you feel loved, you feel welcomed. You exchange ideas, you learn. At conferences you go out for fancy dinners. Vendors host evening parties with free mixed drinks. You feel valued. You have a connection with "like-minded people". You give awards to those who excel at the work done within the tribe. There's recognition.

Compare all of that with what you deal with in your own company. When is the last time your company made you feel the way your tribe makes you feel? Did you formally celebrate last year's scintillating 9.4% record pre-tax profit performance? Did you receive a promotion, or recognition? Or did you get a 3% cost of living increase?

Boomers dominate Director, VP, and C-Level jobs. They aren't going anywhere anytime soon. As a charter member of Gen-X, I've repeatedly observed how my generation is stuck in idle. Companies struggle to provide a reward structure for employees trapped behind tenured leaders.

I've watched with curiosity as my generation (and folks from other generations, too) splintered into these tribes.

I've also watched with curiosity when individual members of these tribes gather in the same conference room within a brand --- all speaking different languages, nobody able to truly understand each other. A C-Level executive recently said to me that "I don't understand a word any of these people are saying".

Within each individual tribe, the C-Level executive would be the problem ... "s/he doesn't get it".

For the tribe members, this splintering offers opportunities to achieve professional self actualization.

What impact does this have on the businesses tribe members support? How can a brand meet the needs of an individual employee choosing to express himself/herself through a tribe? Or does it even matter anymore?

And think about the leadership opportunities for the individual who can unite all these tribe members, creating a high-functioning team within a business? That's where the real opportunity exists.

Why can't that person be you?