Tuesday, July 14, 2009

Mulit-Silo Retail Marketing


"Tear down this wall!" was the famous challenge from United States President Ronald Reagan to Soviet leader Mikhail Gorbachev to destroy the Berlin Wall. I'd like to issue a similar challenge to today's retailers who continue to operate their e-commerce divisions in isolation from their offline organizations. In these multi-silo companies employees across online and offline divisions don't cooperate nor even communicate with each other regularly.

Today's customers expect seamless experiences across channels and many retailers have recognized for awhile that their multi-channel customers are often the most profitable so it makes sense to integrate marketing communications to reach them online and offline. Cross-channel shopping behavior from online to offline (and vice versa) is a significant phenomenon, yet I only know of one specialty retailer who has put this priority on their strategic agenda.

Multiple independent studies have confirmed that online advertising drives offline sales. It's time for offline-centric retailers to recognize the power of their online marketing channel to drive traffic to their stores. Jupiter Research forcasted in its 2006 study that the portion of online plus online-influenced offline sales in comparison to total U.S. retail sales is expected to grow to 47% by 2011. This implies that of the average dollar spent in retail 47 cents will be spent either online or influenced by preceding online browsing and research activities.

I believe that if you sat down with a retail executive and shared these research findings that they would not be surprised. Why is it then that they continue to let their online divisions operate independently from the offline divisions? I believe strongly that these retail organizations need to be redesigned and common key performance metrics (KPIs) put in place to align the objectives of the e-commerce and store divisions.

In the past two weeks I've have had a surge in calls from retail clients looking for recommendations and benchmarks to assist them in designing their e-commerce organizations. I hope that this is an indication that some retailers are getting the wake-up call. I took the liberty to let them in on the secret that tearing down the walls between their online and offline channels and building an integrated, customer-centric organization could improve their bottom line.

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