The multichannel path to profit

Isn’t this whole online debate fascinating? Many of us are nominating one channel or another (stores versus online) as the preferred way that our customers like to shop with us.

Or alternatively suggesting that one channel is more profitable than another. There is some evidence to support the view – some categories with higher return rates and so on – that this remains reasonably true.

I guess when it gets down to it, consumers interact with retailers for one simple reason, they like to shop! How they achieve this comes down to the lure of the retailer, their offer and the resonance with their targeted and right customer.

Equally, we have seen a significant cycle of reducing pricing (that is discounting) to seduce the cautious consumer, often with little or no offsetting increase in the sales line. And as my friend and colleague at Ebeltoft Group, Mr Jim Okamura puts it:

“If retailers are complaining about profit, then they have to find a better way to appeal to customers in full-price customer experience. If they have to discount to hit their revenue numbers, they should look in the mirror and at their brand equity. The profitability is largely attributable to aggressive discounting (panic) on the part of the merchants. And if their only way to retain market share is to be aggressive in the online channel, then they have to choose between market share goals and profitability, and strike the right balance. Retailers cannot blame their own actions on the ecommerce channel. Consumers are voting with their money to shop online, so it is our job to figure out how to do that profitably; not be in denial and falsely state that you’ll make more money if you minimise your share of revenue online.”

So perhaps the times really haven’t changed that much – when faced with competitive pressures, retailers over the ages have had to enrich their branded experience, differentiate from competitors and attract new and existing customers, whether by some form of value-add, experience or element of surprise. In the absence of such experiences, often retailers had to use price as their weapon of choice, sometimes as the result of simply buying too much stock to reach over ambitious targets.

What I can say is that we increasingly see the true multichannel retailer delivering four to five times average revenue and EBIT returns than the ‘mono’-channel. So the multichannel path to profit is a  layered and interrelated path that delivers, above all else, the true path to profit for today’s retailer.

Brian Walker is the managing director of Australasia’s leading retail consultancy, Retail Doctor Group.

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