Do Web Sites Feed or Cannibalize Physical Store Sales?

FROM IT BUSINESS EDGE

Do Web Sites Feed or Cannibalize Physical Store Sales?
Posted by Ann All on April 8, 2008 at 3:41 pm

Last June, Forrester Research released an interesting study that found online retail sales were slowing after years of steady growth. As I often do, I managed to work in a reference to my previous life as an intrepid writer covering the financial services beat — and thus spending a fair amount of time talking to bankers about strategies for their Web sites.

These nearly always evolved from using sites as a way to migrate customers from expensive channels (branches) to less expensive ones into presenting sites as a value-added customer convenience that supplemented rather than replaced branches. Turns out that while there was lots of stuff folks felt comfortable doing themselves online, there was plenty of stuff they didn’t want to do there — and much of it involved some very lucrative business indeed, such as loans.

So I wasn’t surprised to see the idea of cannibalization — online sales displacing those that would otherwise take place in physical stores — played up in this year’s update of the research, conducted by Forrester for Shop.org, a division of the National Retail Federation. Forrester doesn’t have an answer, reports MercuryNews.com. “It’s a good question” as to whether retailers lose some in-store sales to their own Web sites, says Forrester analyst Sucharita Mulpuru. Because physical stores account for the lion’s share of their business, many retailers would likely prefer for customers to do most of their shopping there, says Mulpuru.

Yet a spokeswoman for Shop.org disagreed, writing in an e-mail to the MercuryNews.com:
What we hear from multichannel retailers (i.e., ones with stores and Web sites) is that they truly do not care which channel you shop, as long as you shop with them. People who buy online are just as likely to make impulse purchases, become a loyal shopper, tell their friends about their experiences, etc., as those who buy in the store.

Much like the banks before them, the inherent challenge for multichannel retailers is in offering a seamless experience between their online and offline channels. Customers get frustrated with the lack of a common transaction history, for example. But it’s often difficult for retailers to port information from aging legacy systems to newer Web-based platforms.

Retailers must also realize that even if customers don’t buy online, they often do legwork there, scouting for the right product and price before venturing to a store to buy it. Thirty-six percent of consumers routinely do this, according to a JupiterResearch statistic I cited in a February blog about the tricky nature of Internet marketing. That figure may be considerably higher for big-ticket items. Steven Keith Platt, of Chicago consulting firm the Platt Retail Institute says he believes up to 70 percent of folks shopping for a car conduct research online before ever setting foot into a dealership. Suggests Platt:

Retailers need to translate that into a better shopping experience - say with handheld devices for the tech-savvy to continue using in the store - to close the sale.

In an interesting variation of what Platt describes, consumers could learn about BMW products at informational kiosks the automaker deployed at sites including airport terminals, malls and health clubs. Within hours of viewing the information, interested consumers would receive e-mails with invitations to take a test drive, according to the Self-Service & Kiosk Association.

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