This article presents evidence that multichannel retailers are out-performing online-only (“pure-play”) retailers, and that their success is reflected in their market value.
Multi-channel retailers are most successful when they define distinct roles for each channel, use the Web creatively as a customer acquisition tool, and work hard at converting browsers to buyers. To help get this last part right, the authors isolate key defection points – critical moments when retailers are apt to lose customers. They conclude that, for retailers, the key to making the most of the Internet is to correctly determine its strategic role in relation to other channels and invest to play that role excellently.
Little more than a year ago, some pundits were predicting the downfall of shopping as we know it. One pseudo-revolution later, few of us have changed where we shop; we’ve just found more ways to get there. Indeed, as pure-plays – companies doing business only over the Internet – struggle to find a profitable business model, multi-channel companies have quietly adapted their own. They have fashioned the Internet into a tool that can help them expand customer roles, build revenues, cut costs, and improve profits. They have achieved this “quiet victory” by leveraging their existing assets, brands, and customer bases through their online channel; by cleverly exploiting the synergies between online and offline operations; and by finding creative ways to convert the highest possible percentage of website visitors into loyal customers.
The market is paying attention to these success stories. A Bain & Company analysis shows that even as Internet pure-play and technology stock valuations have plummeted, multi-channel companies that have embraced the Internet are enjoying premiums on their market multiples proportionate to the percentage of business they move online. In other words, multichannels that invest in and harness the power of the Internet – rather than half-heartedly dabbling in it – are achieving measurable results and strategic advantage over their competitors, and the market is rewarding them.
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