The Role Of A Website In A Multichannel Catalog Business

Yesterday, we talked about the way a website provides information for the retail customer in a multichannel retail business.

Today, the focus shifts to the role of the website in a multichannel catalog business. How can Multichannel Forensics help us understand how a website serves a catalog customer?

Catalog customers are different than retail customers. In retail, the customer goes to the store. In catalog, marketing comes to the customer.

This results in significant differences in the way a website serves a customer. In retail, the customer uses the website to obtain information, information that is ultimately used to purchase merchandise in a physical store. In theory, the website should be designed to take e-commerce orders, but is primarily designed to drive retail sales. The website reflects "the brand", if you will.

The traditional catalog business faces very different challenges. Historically, the catalog was used to drive sales to a telephone channel. Today, the catalog is driving more sales online than through the catalog channel. This is where complexity occurs.

Multichannel Forensics can be used to help the marketer understand how the telephone and online channels work together.

Frequently, catalog marketers have a telephone channel in "Hybrid/Equilibrium" mode. This means telephone customers have an approximate 50/50 chance of purchasing via the telephone channel next year. In addition, telephone channel customers are slowly moving online (hence, the designation of "Equilibrium").

The challenge for catalog marketers occurs when analyzing the online channel. Online customers frequently operate in "Acquisition/Isolation" or "Hybrid/Isolation" mode. This means online customers are unlikely to use the telephone channel.

Worse, catalog marketers often observe that the online channel has a lower annual repurchase rate than the telephone channel. This means that traditional catalog marketers are slowly "losing control" over the customer relationship. In the past, catalog marketing drove high corporate repurchase rates. Today, catalog marketing frequently drives average corporate repurchase rates, and lower-than-average online repurchase rates.

In other words, the catalog inspires the customer to "think" about buying something. The customer may choose to order over the telephone, may choose to go online, or may choose to put that online visit on hold. The longer the customer chooses to not go online, the less likely it is that the purchase will take place.

Long-term, the catalog marketer must use a combination of catalog marketing, e-mail marketing, search marketing, affiliate marketing, portal marketing, and word of mouth marketing to achieve the same corporate repurchase rate (and spend per repurchaser) that was achieved in the old days of catalog marketing in the telephone channel.

If this potpourri of marketing channels cannot achieve the same repurchase rate, order frequency, items per order, and price per item that the old-school catalog techniques produced, the catalog marketer faces long-term challenges.

For the catalog marketer, the role of the website is changing. The website becomes the primary order taker for the catalog marketer. But more importantly, online marketing techniques must become effective enough to replace the ever-decreasing effectiveness of catalog marketing. The website must evolve as well, providing the information, entertainment, and additional product assortment necessary for the brand to maintain historical corporate repurchase rates (and spend per repurchaser).

For the catalog marketer, the website plays a very different role than the website plays for the retail marketer. This is not a dynamic that is well understood by multichannel pundits.

The Role Of A Website In A Multichannel Retail Business

Ultimately, our customers will decide the role of a website in a multichannel retail business.

Catalogers are experiencing a very different set of dynamics when strategically considering the role of a website. There is an odd interplay between catalog advertising and online purchasing that causes catalogers consternation.

For retailers, the relationship is much easier to understand.

Multichannel Forensics suggest that when two channels are involved, one channel frequently benefits from the efforts of the other. In the case of the online channel and the retail channel, retail is ultimately the "order taker". The online channel frequently acts as the "information channel".

As an example, I purchased a television at Circuit City last week. I did all of my research online, comparing Circuit City to Best Buy and other retailers. I chose Circuit City because they had a better price on the television I wanted, and installation was one hundred dollars cheaper than it was at Best Buy.

In this case, the internet provided the forum for my shopping experience. Circuit City's website did a reasonable job of presenting information to me. I even put my television in the shopping cart, so I could see the price. But the website did not "convert me", from a traditional web analytics standpoint. Some pundit will clobber Circuit City for having a paltry online conversion rate, for failing to convert my shopping cart.

The website did exactly what is was supposed to do --- and receives no credit for the work it did.

The retail channel took my order. An installer (another channel???) will hook me up next week.

If this relationship exists, you'll easily see it in your Multichannel Forensics analysis. The online channel will be in "Acquisition/Transfer" mode. This means that, for online purchasers, fewer than forty percent of them will purchase again online next year. Furthermore, those customers are likely to switch their allegiance to the retail channel. The retail channel operates in "Retention/Isolation" mode. This means that at least sixty percent of last year's retail channel customers will purchase in retail again next year --- and these customers are unlikely to purchase online next year.

In this example, the website plays maybe the most important role in connecting the customer to the retailer.

Internet Research -----> Website Visit -----> Retail Or E-Commerce Purchase -----> Installer Visit
The internet is a gigantic ecosystem where customers research merchandise opportunities. The website is the retailer's best chance to provide a customer the information necessary to chose the retailer's brand over another retailer. The website is a much smaller, more controlled ecosystem, playing a critical role in the purchase process.

E-commerce should be viewed separately from the role of the website. E-commerce is only about taking an order that is to be delivered to a customer.

When we separate E-commerce from the website experience, we immediately open ourselves to an endless array of multichannel opportunities.

Retail, because of its three-dimensional, human, warm, hopefully inviting nature, will garner the vast majority of purchases.

The website, not E-commerce, becomes the critical link between customer and brand in multichannel retail. A Multichannel Forensics analysis should illustrate this fact --- one should see that E-commerce customers transfer back to retail, while retail customers generally maintain their channel loyalty in stores.

E-Commerce: Order Taker, Or Demand Generator?

I've read through three presentations in the past week, all written by folks with a strong catalog heritage.

Each presentation stated that websites are not capable of generating demand on their own. Instead, some sort of marketing must happen to drive the customer to a website.

What do you think of this hypothesis? Do websites generate their own demand? Or, are websites helpless tools that require marketing to get the customer to visit the website?

Or, do you fall somewhere in-between, rooting for a business model like Zappos?