Successful Cross-channel Retailing: 4 Concepts to Master

  • Written By: Phil Reney
  • Published On: May 2012



Retailers who want to compete effectively at more than a local level need to engage customers on more than one channel—it’s what today’s customers want. Many retailers have undertaken efforts to attract different sets of customers through multiple channels (multichannel retailing), but true cross-channel retailing involves a comprehensive, synergistic strategy that spans those channels. Cross-channel retailing entails presenting and protecting your business’s image, brands, and offerings as seamlessly as possible across the different channels you have chosen to use to engage your customers.

Cross-channel retailing is not limited to exploiting bricks-and-mortar and online storefronts. You may integrate a variety of other channels such as social commerce, mobile kiosks, catalog, scheduled events, etc. But with the plurality of choice available to retailers to connect and engage customers, you need to have a sound understanding of those channels and how they can coexist.

Retailers must holistically approach the various channels at their disposal. And this view revolves around the following concepts: channel development, channel integration, channel engagement evaluation, and channel roadmap.

Channel Development

The concept of channel development is tied to channel performance and understanding the successes or failures of a given channel by looking at the conditions behind it. Why was traffic down at this retail location? Why were customers engaging with only certain products within a channel at the expense of other products? What turned the conversion ratio around? Why were customers buying the same or similar products from one retailer instead of another? These are the types of questions that will drive your understanding of the conditions around a given channel to steer your efforts in adapting or re-evaluating your channel to gain customer engagement.

Ultimately, it is about knowing the strengths and limitations of a given channel. For example, many years ago Dell tried to sell its computers at island kiosks in shopping malls. It didn’t last very long. Why? Customers couldn’t associate making an important purchase of hundreds of dollars with such small, open locations, often in a noisy environment with no privacy to make an educated decision for a purchase. This was compounded by the fact that technical support wasn’t available on-site. Trust couldn’t be established. Moreover, such locations didn’t lend themselves to a key aspect of Dell’s offering: PC customization. Kiosks weren’t a new concept at the time; Dell should have known—through observation or case studies—that kiosks were being used successfully for items of much lower value and complexity. Successful businesses attained customer engagement because they had a better understanding of customer expectations, both of their offering and of the channel being used.

Besides driving the creation of new channels, technological innovations can be applied within existing channels to help a business distance itself from its competitors—by fulfilling as yet unmet customer expectations or by creating a new expectation across the market. Imagine, for example, if customers could use a mobile app with a store’s radio frequency identification (RFID) system to access information about a product and its availability. A grasp of channel evolution, and recognizing a channel’s potential, allows you to better position your business against your competition for a given channel.

Today’s customer wants an even experience across your retail channels. Make sure your channels meet basic customer expectations before you ask customers to consider engaging in a new channel for your products.

Channel Integration

Cross-channel retailing was first designed to engage new customers to expand a business’s overall market footprint. Undeniably, some customers more than others are more receptive to specific channels. For example, a customer may choose to engage a retailer through a Web store if there is no physical store close by. So how do you reap the best of both worlds?

This is where channel integration must go beyond the back-office operations of your organization. It goes without saying that a more centralized or unified back-office will help you control duplication of efforts and keep your costs down. It also means that the customer experience between channels is as seamless as possible. Integration allows the customer to, for example, arrange store pick-up for a product purchased online, log in-store purchases under a customer profile that’s accessible online, or return an online purchase to a store location.

However, retailers with an extensive channel footprint, such as Best Buy or Staples, have to contend with channel cannibalism—as they have a strong presence both in store locations and online, some customers migrate between channels, thus benefiting the overall revenue stream of one channel at the expense of the other. The multichannel presence has created a new type of customer, the omni-channel customer, who will engage with a retailer on multiple levels, split his or her buying power across multiple channels, and expect a seamless experience from one channel to another.

Retailers also risk losing customers to competitors that can offer a better experience through a better integrated mix of similar channels. Hence, keeping an eye on how your competition handles their channel integration is critical. It is a better proposition to be a leader than a follower, but in either case, you need to successfully engage your customers across your various channels.

Channel Engagement Evaluation

Channel engagement is driven by the right product assortment (i.e., product lines, variety, brands, etc.) and the shopping experience, which consists of presentation of products, range and quality of services offered, ease of transacting, and overall ambience, to name but a few elements. Each channel has operating costs, and while retailers will always be judged by their shareholders in terms of overall performance, it is important to evaluate the performance of individual channels to help you identify if changes need to be made to the structure that supports the shopping experience or to the product mix.

While electronic channels have the envious advantage of enabling you to easily track conversion rates, it is possible to use video systems to track in-store traffic and compare it to revenues for a similar measure for physical stores. It is also possible for bricks-and-mortar stores to more precisely evaluate levels of customer engagement, particularly for the omni-channel customer, for example, if customer information is unified through the use of membership cards, such as at Costco.

Beyond employing some kind of quantitative metrics, you must consider your ongoing and future engagement efforts critically. Does this channel allow you to support the services needed to sell your products? Can this channel support your customers’ expectations of your business and your brand? How are customers normally engaging this channel? Watching your competition is a given, but you may also want to look at how noncompeting businesses make use of similar channels to inspire you with innovative paths to follow or adapt.

However, a key principle of customer engagement is to play to the fundamental nature of the channel. Each channel is suited to specific customer expectations. For example, a hosted event can be a powerful channel for on-the-spot retailing and brand awareness; such events tend to be promotional in nature, to build customer interest in the brand and a few featured products. This is not the right channel for presenting a large line-up of products that serve multiple needs.

Channel Roadmap

If you judge by the unbridled manner in which many retailers implement new channels, it’s clear that channel roadmaps aren’t generally given much consideration. This was particularly blatant during the early days of e-commerce, when bricks-and-mortar retailers were suddenly feverishly producing Web stores with hopes of market expansion and in fear of being left behind. Or recall the more recent gold rush on Facebook stores, which ended in grinding failure for many retailers and counted JCPenney and The Gap among the early victims.

I have nothing against experimentation—it’s critical to inspiring innovation and growth. However, a little more reflection might be in order when it comes to growing your brand and your revenues in a sustainable way.

But you need to consider the fundamental aspects of a given channel and how it can be deployed to meet your customer’s expectations and further your objectives. A good example of channel roadmapping is Amazon, a giant of e-tailing and master of long tail retailing. The organization is rumored to be planning to open a physical location (just one for the time being, as a test). The rationale for this decision primarily concerns its proprietary Kindle-brand e-book readers and tablet devices. Amazon entered the market of low-cost tablets in support of its app store and distribution of e-content. The Kindle Fire is a highly interactive device and, while there has been great interest in the tablet through Amazon’s online channel, a significant number of potential customers would prefer to try one out prior to purchase. Additionally, support for Kindle devices is not at the same level as for other comparable brands; every Kindle issue is currently handled by phone, but many of today’s customers would still prefer face-to-face service.

The lesson here? Consider new channels based on the value they can add for your customers and how well they complement your current and future activities.

Closing Words

Cross-channel retailing is a powerful way of expanding your reach—in market share, brand engagement, and, de facto, your revenues. As you battle your competition with product assortment and pricing maneuvers, it is critical to have the proper channels to support your efforts and to understand where and how they can best serve you a winning proposition.

Take the time to understand the core fundamentals of each channel and you will be in a better position to evolve those channels strategically. Both you and your customers will benefit from channel integration and consolidation of information, which will in turn provide better visibility and reactivity. Lastly, careful channel planning will help you build a stronger brand designed on sustainability and reliability.

 
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