The Multichannel Trilogy by Katie Muldoon

The Multichannel Trilogy

BY KATIE MULDOON

Retail, catalog and online synergy is absolutely essential in today's market

ON A RECENT VISIT TO A NEW SHOPPING MALL, I was astonished to come across a Harry & David store. I get the Harry & David catalog and had no idea the company operated retail stores. But a closer look at one of its catalogs showed an extensive store listing, albeit in tiny print on the order form.

If it hadn't been for the immense Harry & David logo, I probably would've walked right by the store. It looked nice, but not any more or less inviting than the many other shops in the mall. There was nothing distinctive to make anyone aware they were being offered another way to shop with an old friend. Maybe its main purpose, and I am betting on this, is to introduce new folks to Harry & David.

Even if it's not perfectly executed, a move into a different area to increase sales is the way for a company to go. It has become more and more obvious that single-channel distribution means painfully slow growth at best. When I started teaching catalog courses it was easy to name decent-size companies that were freestanding and growing: Horchow, Lillian Vernon, L.L. Bean, Lands' End. These days, with the exception of Cornerstone Brands, it's hard to name a predominantly single-channel cataloger that's expanding.

For non-retail catalogers, the sales growth that's happening tends to come from the Internet, one part of what I call the multichannel trilogy (retail, catalog/telemarketing, online). An example is Hanover Direct. With only two parts of the trilogy it has flat or declining sales in its base catalog business, and growth only from the Web.

More often than not, without these three methods of reaching the consumer, a company is doomed to mediocrity. Some feel that having stores, a Web site and a catalog only causes cannibalization, spreading the sales around while creating additional costs of establishing and maintaining the other channels.

The reality is that if a firm doesn't cannibalize its customers, its competition will. Consumers are getting used to having a choice about how they'll purchase: from the store, when they feel like an outing or need something in particular; from the Net, also for that one special item; and from the catalog, for impulse buys.

Sure, sales could be increased by adding extra titles, and some companies, like Williams-Sonoma, have done this expertly. But many others — the highly respected Sharper Image being one prime example — have created spinoffs that no longer exist. Sensing an opportunity in the healthcare market, they came up with a short-lived book that offered upscale health products. Made sense…but not enough. The catalog had a short, not-too-healthy life. It's usually more time- and cost-efficient to build off an existing brand than it is to create a new identity.

Our industry has always talked about service, but today's consumers want products available the way they want them and when they want them. Customers will not claim to be satisfied with good service, but bad service turns them off. And to consumers, bad service has come to mean anything that interferes with ease of purchase.

The multichannel trilogy translates into three very different shopping experiences. The way customers chose to shop from a catalog in the past is not necessarily how they wish to buy from the other channels now. Probably the most common example is that best sellers at retail die in a catalog and vice versa.

As one channel expands into another, smart CEOs will hire the expertise to assure that their entry into a new area is not at ground zero. Even more critical is setting up methods for regular feedback from customers:

Learn firsthand what they really want when they shop on the Internet, at the store or via the catalog.

Test a pop-up questionnaire on the Web with five or so queries about the shopping experience. Include a similar paper questionnaire in packages that are sent to those who ordered by catalog and compare the answers.

But it's not enough for a firm just to participate in the trilogy. The effort must be memorably integrated, visually and through the shopping experience itself.

That was the key flaw with Harry & David's retail store: Nothing about it would stick in anyone's mind. Walking in, you might spot a catalog on the counter with Harry & David's lush cherries on the cover, but don't try to buy them in the store. It doesn't carry them.

A better example of integration is Williams-Sonoma. The store windows are bright, with retro green or yellow appliances; once inside, you notice that the same products featured on the catalog's cover are available in the store. You're left with a lingering visual memory, and a pleasing experience overall.

I think Harry & David is one of the sharpest marketers in our industry. But the circumstance described above illustrates a real concern: While DMers need to add sales channels rapidly, few have created a memorable presence, one that offers consumers a linked, unified impression.

The retailer Chico's does an inspiring job of consolidating and personalizing its marketing. Sales are projected at $260 million for 2001, a 67% increase over last year. Those numbers are backed by a 45% jump in 2000 and a 43% gain in 1999.

Go into most women's retail stores and they are eerily quiet and devoid of customers. Step inside one of Chico's 254 shops (growing by 50 to 55 units per year) and you feel as if you're on to something important. There's an air of excitement. Customers talk to each other like they're members of a club.

Which they are: Chico's Passport Club takes 5% off customers' purchases after they spend $500. The club sends out birthday bonuses, advance notice of double discount days, provides free shipping, savings on gift certificates, incentives to introduce new members, private sales and other surprises. There is regular, attentive, personalized communication. You can even have a party at a Chico's.

Reactivated in February 1999 after a false start, the Passport Club now has more than 221,000 members. Those who sign on spend $135 on average vs. $82 for non-members.

Chico's Web site is as uncomplicated as its merchandise. The catalog has evolved from a store-traffic generator to a vehicle for off-the-page sales and includes a personalized message plus a trackable incentive to visit the store. Each part of Chico's multichannel trilogy complements the other, all with an undertone of fashion-savvy friendliness as well as value (but not discount) prices.

If synchronized, the trilogy doesn't serve only one customer, but has the potential to attract new ones. Because the marketer's brand is exposed in more ways, it can be discovered by those who were less keen on the firm's previous shopping methods.

Tracking how new customers come into the fold, and their sales behavior over time, has become more complicated. But it can be rewarding in that DMers now have more marketing options. If a company doesn't collect customers' sales data and really use it, that company is frivolously throwing away information that can help it market more cost-effectively.

Probably the key component to synchronizing the multichannel trilogy is a marketer's infrastructure. Purchasing, inventory, customer relationship management — all these functions and their reports must be consolidated. All types of ordering must be merged into a whole. Customer history must be collected and integrated. There are too many horror stories about data obtained from the Web not being taken into account, resulting in customers being treated like newcomers and in much higher mailing costs for the cataloger.

As ideal as perfect coordination is, a firm shouldn't spend so much on its systems that the economies won't work. McKinsey & Co./Salomon Smith Barney reported in the June 26, 2000 edition of The Industry Standard that, on average, it takes two years for a company to break even on a retail store and seven years on a Web site. From my own experience, I know it takes about three years to break even on a catalog.

Businesses should keep these figures in mind when deciding how to invest. Almost as much impact might be achieved by providing less expensive — but still impressive — services for multichannel customers.

Just a couple of ideas: Retailers, allow returns from your catalog and Web site in the store; catalogers, offer your credit card online, through the catalog and as “take-one” promos in your stores.

While all this data consolidation is going on, a firm shouldn't forget its employees. They should be kept informed about how the multichannel trilogy is being set up, how it will affect them and how they should discuss these changes with customers. According to one Chico's employee, store employees are “treated very well.” They're offered stock options, discounts and bonuses.