As shoppers change ways, retailers lag

Increasingly, Web, stores and catalogs used in combination

Consumer behavior changes

Businesses slow to follow trend, industry experts say

January 21, 2001|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

NEW YORK - Many consumers have changed the way they shop because of the Internet, but retailers haven't kept up with buyers' new expectations, industry experts say.

As much of the hype over electronic commerce has faded, retailers have come to view it not as a threat to their stores but as another outlet for their products.

But retailers have failed to recognize how e-commerce has shifted buying habits, retailers and consultants said last week during the National Retail Federation's 90th annual convention.

"We've seen massive change in consumer behavior," Chris Markesky, vice president and general manager of Sapient Corp., an electronic services consultant in Cambridge, Mass., told retailers gathered at the Jacob Javits Convention Center.

"Consumers are in control. They're armed with information" about products, promotions and competing stores, he says.

It's becoming more common for shoppers to browse in two or more channels before making a purchase, he said.

For instance, a consumer might flip through the pages of a catalog but go online to order.

A survey by Forrester Research Inc. found 30 percent of online shoppers rely on two or more channels to resolve problems, he said.

But retailers are still treating their outlets as independent businesses and leaving consumers frustrated by inconsistencies between chan nels.

Consumers end up buying gift certificates in stores that they can't use online or have difficulty returning an online purchase to a store, he said.

Pricing is often inconsistent, and promotions not honored across channels, he said. As e-commerce grows in importance, retailers will need to make multichannel shopping as seamless as possible - especially in returns, customer service, pricing and promotion, Markesky said.

In three years, Internet retail sales are expected not only to grow, to $269 billion, but also to lead to $378 billion in off-line sales, according to Forrester.

Ernst & Young LLP's annual Global Online Retailing report, released last week, found that the 4,400 online buyers surveyed in 12 countries are buying online in increasing numbers and spending more on a wider range of products.

By 2005, the online channel will account for up to 12 percent of total retail sales in apparel, accessories and toys and up to 25 percent of sales of books, music and consumer electronics, the report said.

The report also found that the same consumer who buys in stores is now buying online and demanding the same selection, quality and brands found in stores.

Retailers acknowledged they have had to adjust the way they do business in traditional channels to keep shopping seamless.

VitaminShoppe.com, a New York vitamin specialty retailer with a Web site, catalog and stores - including seven in Maryland - has refrained from getting into price wars with rival stores, so that the company can maintain consistent pricing in all three of its channels, the Internet, catalogs and stores, said Joel Gurzinsky, vice president of business operations.

"We have to ignore it," he said, of the price wars. It has paid off because customers feel they're being treated more fairly and tend to be more loyal, he said.

VitaminShoppe.com has grown across channels with the addition of the Web site, rather than experiencing a cannibalization of sales as some within the company had feared, Gurzinsky said.

"Everything is growing at the same rate, stores, catalog and Web," he said. "The business is growing tremendously with all three channels."

The Internet has also been a source of new customers for Lands' End Inc.

About 30 percent of the retailer's online customers had never bought from Lands' End, and most of those customers end up shopping in the catalog, too, said Bill Bass, the company's senior vice president for e-commerce and International Land's End Inc.

"The people who shop multi-channel spend more money and are the best customers," Bass said.

Many customers cross channels, shopping in the catalog and ordering online, or shopping online and calling in an order, he said.

Like VitaminShoppe, Lands' End keeps its prices consistent across channels. And customers talk to the same customer service representatives whether they shop online or through a catalog.

Retailers who try to make each channel completely identical could end up draining resources, Bass warned.

Lands' End, for instance, offers every product online, but no catalog shows every product.

Even United Parcel Service, which got its start years ago serving department stores, has had to adapt to the shifting patterns, as more consumers expect deliveries in their homes and offices, said Alan Amling, director of e-commerce for UPS.

Not only do consumers expect shipments immediately, but they expect to be able to track deliveries online

On UPS' busiest day last year, the number of online tracking inquiries doubled, to 5 million inquiries from 2.5 million inquiries on the busiest day the previous year.

Consumer buying patterns have shifted with each major upheaval in retail over the past century, from the rise of the department store, through the Depression, to the advent of self-service, "category killer" merchants in the 1980s and e-commerce over the past few years, Markesky said.

"Every 20 to 30 years, a large event has caused fundamental changes in the industry," he said.

"Today, it's a technological change with the Internet, and we're still figuring it out"

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