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While walking the aisles and hitting the parties at the National Retail Federation annual show in New York this week, I did what I normally do, which is to beg CIOs to tell their thoughts and observations.
I tried to hit as many of the most important topics as possible before the CIOs extracted themselves to talk with someone who would give them info, rather than extract it. But a theme that emerged in almost every conversation was the online/offline struggle, and I usually asked how much of that CIOs chains revenue was virtual as opposed to physical.
In answering that question, one CIO—who put his own chains online revenue significantly south of the industry standard of about 5 to 6 percent—offered a wonderful insight. When asked what the percent would likely be when his company would take online-offline integration seriously, he said, “The day that neither myself nor my CFO has a clue what the percent breakdowns are, that will be the day weve got it right. As long as my numbers are sufficiently segregated that I can easily identify whats online and what isnt, well still have a long way to go.”
This is a technology exec who truly gets it. The ultimate execution of a multichannel strategy is that the channels become indistinguishable, at least in terms of revenue.
When a customer walks into a retailer and buys a $2,000 oven, did he make the purchase because of a window display or a newspaper ad? Was it perhaps a radio or TV commercial or a Web banner? Could it have been because of a neighbors purchase? Does the customer himself really know?
Customers can go into a store, touch and feel merchandise, and then buy it online hours later because they dont feel like squeezing it into their car and its the easiest way to do it. Or maybe they think they can get the best price online? The reverse is even more true, where shoppers find what they want online, but make the purchase at a local merchant because they want it immediately or because they think it will make a potential return easier.
Those examples are the simplest cross-reference examples of online-offline blurring. The show floor this year had lots of examples of more aggressive integration, such as someone trying on a dress, beaming images of the outfit to the Web and quickly letting IM opinions determine the sale. How do you label that?
This is hardly a trivial issue. Jupiter Research on Jan. 17 issued a report projecting that, within four years, the value of brick-and-mortar sales that will be influenced by online research will top a trillion dollars. It projects a 12 percent compounded annual growth rate, and it declares that “off-line-influenced sales” will account for 40 percent of all U.S. retail sales by 2011.
Then theres the funky matter of cell phones, which on their own are little blizzards of blur. When a cell phones camera can be aimed at a two-dimensional bar code on an in-store poster and that cell phone then instantly displays a deep Web site giving more details, is that a Web sale or a physical sale? More to the point, from the CFOs perspective, what possible difference could it make?
The only effective multichannel strategy is where all channels—Web, in-store, catalog, call center, cell phone, etc.—are incentivized to help each other. Their only goal is getting the sale, and if the situation says the best way to do that is brick-and-mortar, the online manager should be rewarded—not punished—for doing so.
Regrettably, thats not how most large retailers operate. Few know that better than John McAteer, who heads all retail efforts for Google.
He dubs the way many retail chains tackle multichannel as “multi-siloed,” in the sense that they are distinct units where such distinction makes little strategic sense.
Googles approach starts with search and then expands into wherever it can. One approach theyre toying with involves localized searches. For example, someone is searching for a specific kind of product and their IP address reveals they are likely in the Mountain View, Calif., area. Ads for local merchants selling those products will be displayed. Thats online specifically pushing offline, using the only thing that makes offline convenient: physical proximity.
One of McAteers struggles is the lack of an effective way to identify online shoppers who dont feel like registering. Years ago, cookies were seen to be the answer, but hes now seeing figures that some 20 percent of users wipe out all of their cookies every night. Sometimes, anti-spyware programs do it automatically for a consumer. Either way, cookies do not appear to be a long-term answer.
Will biometrics be that answer? If a fingerprint-scanner-equipped mouse is well-designed, it might prove effortless to use.
Technology is even challenging Googles IP Lookup for geography as virtual private networks and other security approaches will either block that information or make it inaccurate.
Theres little question that creating a truly integrated retail environment is the way to go, but no one ever said that the world of changing technology will make it easy.
Retail Center Editor Evan Schuman has tracked high-tech issues since 1987, has been opinionated long before that and doesnt plan to stop any time soon. He can be reached at [email protected].
To read earlier retail technology opinion columns from Evan Schuman, please click here.