What will likely happen in Q4

Press reports are starting to come out that:

• retailers are not hiring as many seasonal employees for 2009Q4.
• merchandise orders for Q4 may be as much as 20 percent lower than in previous years

What can we concluded from these two facts:

• customer service in retail, brick & mortar stores may reach an all-time low.  There simply won’t be anyone around to help you.  You’ll probably have a hard time just finding someone to take your money.
• e-commerce sites will gain sales faster than ever before — for multiple reasons:

First, because you can check yourself out and don’t have to rely on finding someone to help you.

Second, retailers will likely make sure inventory for their online store is broad and deep.  Because they can sell to anyone, anywhere at anytime.  Thus, they will more likely sell thru online store inventory than physical store inventory.  Plus, they can replenish inventory for the online store faster than they can to physical stores (at least, in most cases).

Third, buying online is less frustrating and annoying than going to a store.  This will be especially true, because there will be fewer sales discounts in physical stores (due to lower inventories) and fewer people to help (see “First”).

*  *  *  *  *

Now, don’t get me wrong.  Total direct commerce sales (as reported by the Commerce Dept) remains about five percent of retail sales, but direct commerce sales are growing reliably, while total retail sales has been in decline for most of the past 12 months.  The bottom-line:  We will see direct commerce (online & catalog) take a big jump forward in Q4.

That in turn will cause at least a short-term increase in activity during the first half of 2010 by companies who will seek to upgrade their online store, or maybe even finally set one up.

Filed under: Direct Commerce, Opinion , convenience, Customer Care, Direct Commerce, inventory, Web

Developing a uniform Brand experience across multi-channel

There are two sides to this question — and most see it as a marketing issue.  And certainly it has serious marketing implications.  But the Brand experience is not built entirely upon how merchandise is presented or described.  A huge portion of the Brand experience is based upon customer interactions.

Almost intuitively, we know that we must provide appropriate value to the customer (the combination of price and quality).  However, in addition, we need to treat customers in a way that matches their expectations of the Brand.

And there is a problem with customer interactions across different channels.  After all, it makes somewhat obvious sense that it’s difficult to interact with a customer the same way in a face-to-face scenario, compared to a call center scenario, compared to an ecommerce scenario.

But a truly uniform Brand experience in a multi-channel environment seems to demand more similarity than differences in the nature of those diverse interactions.

So, how do you do it>

I can only suggest a strategy:  deploy a single order management system across all channels.

Boy, that seems simple.  Conceptually, of course, it is pretty simple.  But it’s also deceptively simple and, in reality, very difficult.  And the difficulty is not in the technology, but rather in the management.  It’s likely you will also want a single warehouse management system, as well.  But that’s not as essential, because it’s possible to move inventory & product data between multiple systems and a single OMS.

But the central obstacle to accomplishing this goal is willingness of different internal departments collaborating on a single solution.

In a sense, this is another form of channel conflict — but it’s at the operational level, rather than at the sales level.

To execute this solution, retail operations, customer contact center operations and ecommerce operations must agree on a single OMS to capture sales orders and manage customer transactions at all points of sale — regardless of channel.

Then all these units must collaborate to develop uniform training for staff, based upon uniform company policies.

It’s Change Management 101 — something that almost always gets short shrift.  And, although I don’t mean it personally, it is often the fault of marketing / sales, because they are too anxious to build sales rather than build an enduringly satisfied customer.

Often, only the CEO can solve this, with the patient understanding of the board and shareholders.

Not so simple after all, is it.

Filed under: Direct Commerce, Ideas, Opinion , Customer Care, customers, Direct Commerce, marketing integration, multi-channel, OMS, Web

Why have direct commerce sales held up better than overall retail sales?

First, I suppose I should document the inference in my question that direct commerce sales have held up better.  Based upon Retail Sales data from economy.com, the following facts are in evidence:

• Current retail sales (actually, Aug 2009) are just a little below what they were in Oct 2008.  But they are also about the same as they were in Dec 2005 / Jan 2006.  Overall, a drop of 7.5 percent from their peak in Nov 2007.
• In contrast, current direct commerce sales (Jul 2009), which also peaked in Nov 2007, are down only 2.25% from their peak.

Why?

I suggest there are two reasons:

First, the decline in retail sales driven by the general downturn in the economy has resulted is even less staff at retail stores, resulting in even poorer customer service, resulting in more customers being driven away from stores.

Second, direct commerce has always been driven more by convenience than by price.  And affluent consumers are more interested in convenience than price.  So, affluent consumers, who are less affected by the economic downturn, have sustained sales at direct commerce businesses to a greater extent than retail stores.

The Implications

My concern about this is the longer term effects, when retail managers recognize that their retail store sales will recover regardless of the poor quality of their customer relationships.  If they can get by with fewer staff now, can they get by with fewer staff later?  Maybe, maybe not.  But I bet they’re going to try.

This is just one reason why joblessness recovers more slowly than the economy.

This also explains the continuing pressure on businesses of all types to move to the internet for their core business functions — it allows them to accomplish as much if not more with the same or fewer employees.

Filed under: Uncategorized , convenience, Direct Commerce, economy, retail sales, sales

Target announces impending divorce from Amazon

Here’s a link to the story in DM News.

This is just another example of the maturing nature of the ecommerce space.  No longer does Target need Amazon to attract “eyeballs” of customers.  Frankly, it’s long past due, and I suspect it’s happening now, only because their contract is probably expiring.

On top of everything else,  when you do business with Amazon, you have to evaluate the relative value of access to their customers to the relative cost of Amazon having all your customers.  Which has more value to your business.

My personal view is there is a case to be made that Amazon’s reason to exist is narrowing.  Amazon is best at selling commodities to large numbers of consumers.  If you’re not selling commodities, or your strategy is to differentiate your business from your competitors, then Amazon is not the place for you to be.  And there aren’t a lot of businesses who fit that description.

Filed under: Direct Commerce, News, Opinion , Direct Commerce, Web

Shipping Options for Residential Deliveries

UPS and FedEx are providing new options for residential deliveries.  Here’s the complete story in Multichannel Merchant.

The real news here is that UPS is offering it’s “Basic” service to a broader range of shippers, with much lower volumes.  Up until recently, UPS only offered this service to very large volume shippers, and as they usually do, offered only to clients who also had large volumes of commercial shipments as well.

This simply reinforces the conclusion that there is continuing pressure to find lower cost shipping solutions, especially in the face of increasing rates.  And, the USPS remains the lowest cost solution for “the last mile.”

For some time, it’s been the conventional wisdom that the USPS’ most profitable segment was parcel delivery, but the USPS does not seem to have been able to fully leverage that fact in their own marketing.  Thus, the recent USPS campaign around Priority Mail flat rate shipping.  Which is probably the most sensible advertising campaign the USPS has ever executed — good for them.

Good low cost shipping options remain an important component of direct commerce strategies — driven largely by the near universal attractiveness of free shipping offers.

Filed under: News, Opinion , advertising, Direct Commerce, FedEx, shipping, strategy, UPS, USPS

Are electronic catalogs an alternative to paper catalogs?

Well, frankly, I don’t know the answer to that.  But as an avid direct marketing buyer, I know I’d rather get an electronic catalog than the collection of paper catalogs I get.  And it’s not because I’m trying to save the trees.  The trees (in reality) don’t need saving.  There are more trees in North America today than there were in 1776.

Web sites are for buying.

Catalogs are for shopping.

I’ve migrated from paper trade magazines to almost all digital trade magazines.  Why not catalogs as well?

Add functionality that let’s me click on any item in the e-catalog to add it to the order form.  Or, add it to my wish list.  Or add it to my gift list.

Like most Lands End buyers, for a long time, I got a catalog every week.  Now, I get an email every day and a catalog only once per quarter or so.  I don’t think I’ve bought as much from Lands End as I used to.  I like to browse thru catalogs — I find things I had not previously thought of buying.  Sure when I need a new pair of jeans, I go to Lands End and buy them.  But there is more that I might buy, if I ran across them in a catalog.

Do you ever wonder if the staff at the largest direct marketing companies are direct marketing buyers?  I kind of doubt it because I feel like they miss what it’s like to be a customer.  And that’s why we don’t have very many electronic catalogs yet.

Maybe soon.

Filed under: Direct Commerce, Ideas, Opinion , buying, electronic catalogs, email marketing, paper catalogs, shopping

What drives direct commerce?

This post is an exercise in reminding myself of the fundamentals.  And just like football, you’ve got to get the fundamentals right, before you move on to the more sophisticated permutations of the business.

The fundamentals of Direct Commerce are convenience, customer service and, sometimes, price.

Convenience
The reasons the direct marketing channels exist, at all, is because they are more convenient than the brick-and-mortar retail channel.  What is it about convenience?  Could be any of several things — which varies by the individual customer:

• saves the time to drive to and from the store
• avoids having to “rummage” thru a store to find what you’re looking for
• avoids having to deal with untrained, poorly trained or rude retail clerks
• avoids having to find a parking space
• avoids having to “lug” stuff to and from the car
• avoids the crowds at the mall — especially at heavy shopping seasons, like Christmas or Back-to-School
• allows me to shop from anywhere — work, hotel, and now, with a mobile device, even from my car

How can you provide additional convenience to your customers and, just as importantly, to your prospective customers?

Customer Service

Customer Services has several components.

Pre-sale contact, when a customer is trying to learn more about a product so they can make a decision whether or not to buy, whether or not the product meets their needs or satisfies their desires.

Post-sale contact, when a customer is trying to resolve some issue which has arisen after the purchase decision.  This might be an exchange, a return, a simple “where is my order?” inquiry or anyone of about 20 or so typical customer service inquiries.

Finally, reliability and trustworthiness, which at the end of the day, determines if a customer wants to do business with you again.  Your customers need to trust that you’ll treat them right and that you’re not afraid to actually talk to them on the phone.

Have you noticed how difficult it can be to actually get a customer service rep on the phone?  Or, even get a reasonably prompt answer to an email?

A lot of companies spent a lot of time and effort trying to avoid dealing directly with their customers.  Ever tried to call Amazon?  It’s almost impossible to find Amazons’ customer service phone number.

Price

And I should emphasize that price is only sometimes a fundamental.   It seems to get more important as the product price points increase, but there is also a point at which price becomes irrelevant — either because the price is so high or the price is so low.

And the exact location of this price range varies by product category.

This is also why shipping cost is a factor.  My rule of thumb is that if shipping cost is more than 10 percent of merchandise cost, then the customer will at least “pause” to consider if it’s worth it.

So, be sure you spend a little time on the fundamentals each week — then move on the more esoteric stuff.

Filed under: Direct Commerce, Opinion , convenience, Customer Care, Direct Commerce, direct marketing, price, shipping, strategy, Web

Systemax exits hosted e-commerce software business

There is probably a lot behind this story in DM News.  But ultimately, it’s a failure in execution.  Compounded in my view, by a mismatch between the vision of the company and the vision of it’s prospective clients.

Fortunately, there are still a lot of good solutions in the marketplace — perhaps not integrated to the breadth that PCS promised, but still good solutions.

Filed under: Direct Commerce, News , ECP, OMS, WMS

Survey Says …

Customer service is tops at retaining customers …


Here’s a headline in Internet Retailer, I love to see, because I’ve been “preaching” this forever.  Most of the people who buy via direct commerce channels (web, phone, mail) are more concerned about convenience and customer service than about price.


Price and breadth of merchandise selection are now table stacks or irrelevant.


After all, it’s so easy to find a specific product at a price I’m willing to pay, that breadth of selection is not inherently a strategic advantage — especially when attracting new customers.


And as far as price goes — follow me on this:


Have you ever used one of the comparison price engines?  You can find 20 web sites, all selling the exact product you want to buy.  And you can site at your computer and see all their prices simultaneously.  Do you always pick the lowest price?


I know I don’t.  I first look for a familiar name.  And if I don’t see one, I look for customer ratings (not completely reliable, but at least a good indicator).


I steadfast avoid companies who don’t accept returns (unless I know it’s something I’ll keep).


You see, my concern is about my convenience.  I don’t want to get stuck with something that disappoints.  I want a company I can trust to treat me reasonably, if not unreasonably well.


Even in good times, Customer Service is the best way to keep the best and the most customers.

Filed under: Direct Commerce, Opinion , Customer Care, Phone, retention, Web

The last step in direct marketing channel integration

I had lunch earlier this week with a old and tenured friend, who runs a personalized mail business.  As with many, if not most or all, direct mail production companies, his business is suffering some.

He asked me to peer into the future and tell me what I thought was going to happen to the industry.  I won’t claim that my insights are better or more predictably accurate than anyone elses, but here they are:

First, I think the efficacy of direct marketing is being publicly proven — again.  For example, as I posted earlier.  The DRTV business is growing in this economic downturn, because of the reduced price of network TV advertising.  General advertising agencies don’t have budgets from their clients to “over pay” for television time, so DRTV is proving how much stuff you can really sell over TV, rather than just advertise it.

Second, while retail sales are flat or down, ecommerce and mail-order sales are flat or increasing (this according to US Dept of Labor statistics).  Retailers continue to commit increasing resources to their ecommerce initiatives.  Chicos FAS even “replaced” their CEO because he had not devoted sufficient resources to their “direct” business, which was growing faster than any other segment.

Third, internet based retail stores are great “buying” channels, but poor “shopping” channels.  Even with ubiquitous broadband access, you cannot flip thru a web site the way you can flip thru a catalog.  Interestingly, the big catalog companies, such as LLBean and Lands End and others, continue to drive business to their web site by mailing catalogs.  And their web sites are continuing to grow as the point of origin for more and more of their total order volume.

Fourth, electronic-mail does not replace paper-mail (at least, not yet).  By all reports I’ve heard, response to email marketing is 10-20% of response to paper-mail marketing.  That means if you get 2% response to a catalog, you’ll get 0.2% response to an email effort — at best.

And even if the email marketing effort is statistically more profitable, the gross sales and net income remains dramatically lower than traditional direct marketing efforts.  So, all of these merchants who are trying to save money by shifting declining resources to electronic marketing will likely find they will have to return to a more balanced budgetary strategy.

The more difficult question is when will this rebalancing occur — almost impossible to predict.

So, here’s the question I think we need to be contemplating more:

How can we integrate the web as a response channel to paper-based direct marketing efforts, in order to document their efficacy?

And in my opinion, this integration should be more than back-matching orders to mailing files, or forcing customers to enter “source codes” from their catalog.

Let’s have a little creativity in response tracking

Filed under: Direct Commerce, Opinion , buying, Direct Mail, DRTV, email, marketing integration, retail sales, shopping