Always Plan by Channel

Increasingly, catalogers are moving into the multichannel model, and the numbers tell you why. A 2006 Direct Marketing Association survey showed that buyers who use two channels to purchase from a marketer spend 32 percent more on goods and buy 12 percent more frequently than those who purchase from a single channel. Furthermore, customers who purchase from three channels are 73 percent more likely to buy similar products from that merchant, strengthening brand loyalty across all channels while increasing the volume and frequency of sales.

The key to expanding into a multichannel marketplace is how you handle the channels. The tendency is to want to treat all channels the same, and here’s where problems can occur.

Each channel has its own standards of marketing, merchandising and fulfillment designed to address the differences in how people shop within that channel. The businesses that are most successful are those that recognize the uniqueness of each channel and plan accordingly.

This means applying best practices to account for the unique characteristics of catalog, online and retail merchandising at every step of the planning process. That means establishing the company’s overall financial plan, as well as financial plans for each channel, including:
✔ open to buy;
✔ assortment planning;
✔ demand planning; and
✔ purchasing.

Detailed Planning
To plan effectively, catalogers must consider such key factors as the number of titles and drops, response-rate targets, timing of their mailings, new vs. repeat strategies, merchandising hierarchy, robust color/size analysis, and how their products are offered on the page.

Web sites need to be approached as more than electronic catalogs. Merchandisers must consider such issues as the number of Web sites, landing page changes, e-mail campaigns, conversion rates, portal plans, factors that drive sales to Web sites, and seasonal assortment planning.

Likewise, the retail channel has unique considerations. The planning process must take into account new and company stores; seasonal curves; individual store attributes, such as climate and location; as well as attributes and volume grade that can impact assortment plans. In addition, retail merchandisers must not only plan for initial stock quantities, but also back stock and the allocation of assortments to stores based on item performance.

Collaborate, Communicate
The chart below isn’t meant to imply that each channel should operate within its own silo. Following best practices in a multichannel environment requires communication and collaboration between channel teams. Doing so allows you to identify the strengths and weaknesses of all channels as they pertain to all aspects of your business. Make your decisions accordingly.

Channel Differences
For example, an item may perform well on the Internet, but the catalog may be driving those sales. Likewise, an item that’s not doing well online may move better at a specific retail location.

Implementing best practices will ensure you not only have the proper planning in place, but also the ability to make changes that make sense according to the actual market conditions and customer demands.

Quarterly reviews of company and channel goals and planning, for instance, will allow comparisons with actual performance so the necessary adjustments can be made. This information is also invaluable to the next year’s forecasts and planning.

Inventory Level Advantages
For most merchandisers, the advantages of the multichannel model come together at the inventory level. All channels pull from the same inventory, which results in obvious efficiencies and cost savings by eliminating duplication in human and operational resources.

The greatest cost savings come from the ability to consolidate purchasing and shipping. The result of your planning efforts for each channel will tell you what you need to purchase to meet the forecasted demands across all channels. You’ll then be able to combine purchases to take advantage of special vendor offers, meet minimum order requirements and achieve maximum economies of scale in purchasing and handling.

By implementing best practices in the multichannel environment, merchandisers gain the ability to build brand consistency across all channels, coordinate marketing strategies and create cross-channel impacts. All this contributes to the customer experience, increasing the likelihood they’ll buy, the amount they’ll spend and the frequency with which they’ll shop with you.

Ray Goodman is senior vice president of Direct Tech, a provider of multichannel marketing and merchandising systems. Reach him at (402) 895-2100 or rgoodman@direct-tech.com.