Multichannel Management: Structure Determined by Measurement and Allocation

One of the most difficult things about operating a multichannel retail company is channel measurement and allocation. That’s what a panel of marketers concluded during a session at last week’s National Retail Federation conference in New York.

“Everything in online retailing is measurable,” said Sucharita Mulpuru, senior analyst for Forrester Research, in describing some of the key multichannel marketing issues. “You know which e-mail drove a customer to your site. But you don’t really know what multichannel behavior among customers is when you don’t know where customers started a transaction and where they completed it.”

At retail, however, retailers count their hits to store locations. “That’s about as scientific as counting the number of cars in a parking lot,” she said. “The irony is that this is a metric that’s increased over time even though it’s what retailers find least effective.”

Forrester’s research has shown that 74 percent of SKUs in multichannel merchants’ offline channels are available online, and 12 percent of SKUs are available only online. What’s more, the dot-com portions of companies often report only to themselves, creating an additional silo. “That can lead to innovation and allow the online division to go through a few hurdles,” she said, “but when you have a siloed approach, it creates a bit of a messy customer experience.”

As a result of divisional siloing, there still are retailers that don’t have consistent pricing across channels or don’t allow loyalty points to be applied across channels. “Cat fighting” ensues with recorded sales often being a zero-sum game. “Sibling rivalry permeates multichannel retail — who ultimately gets credit for the sale? But we’re moving toward becoming [better integrated] multichannel retailers. Other recent Forrester stats showed that 71 percent of retailers accept cross-channel returns, and 60 percent have a unified customer database.”

There can be benefits to siloed departments, particularly online, for multichannel marketers such as Williams-Sonoma — especially when they’re able to work effectively with other channels’ departments. The Internet has historically been run by a specific group, said panelist Paul C. Miller, senior vice president of direct commerce at Sears Holdings and a former e-commerce vice president at Williams-Sonoma. “We had the ability to scope out what we wanted to do and try some things,” he said.

It was the e-commerce group at Williams-Sonoma that developed the multi-brand, multichannel marketer’s gift registry business. “We had 40 years of experience doing a bridal registry,” Miller said. “The notion that the Internet could radically change that for the customer with added features and functionalities” brought the registry to a new level. “So we integrated it with the stores, as defined by customer and it wound up anchoring the service.”

There’s a growing understanding of how consumers are shopping, and some marketers are adjusting accordingly. Multichannel big box electronics retailer Best Buy reports into a new multichannel capability, said Lissa Gatz, director - customer experience for BestBuy.com. “That’s a great opportunity to get some focus,” she said. “We have a focus on who our customers are, how they want to shop, be it online, store, home service or call center.”

From Urban Outfitters Direct’s perspective, “it’s always ideal to start out with the customer and work backwards,” says Managing Director Julie Bornstein. “But organizations are always political and there are always issues. So a good way is to sit through how organizations should be structured, gain the perspective of how a top person views it and expects people to view it. The bigger the organization, the more structure you need to put in place and the more data you need to support the direct channel.”