Bricks and Clicks: The New "New Economy"

Today's Internet world is a far cry from what it was a couple of years ago, or even one year ago. After letting the dust settle, the retailing old guard have jumped into the new 'new economy,' creating a market segment known as 'bricks and clicks.' And they are making a success of it!

A couple of years ago, forecasters predicted that Internet companies would put traditional retailers out of business. Shopping centers would go the way of buggy-whip factories. After all, why would people drive to a mall when they could shop online in their pajamas in the middle of the night?

Now many of those inexperienced, twentysomething online retailers have gone away, and the established retail giants, with their years of expertise in merchandising, are expanding their online presences. For example, Wal-Mart, Federated Department Stores, and Staples are either broadening their Web offerings or combining their Internet operations with their catalog businesses. And Borders is partnering with Amazon.com, a move that makes financial sense for both companies.

These traditional retailers are finding the Internet an easier place to do business than did the small startup companies - ones that tackled e-tailing without business, merchandising, or retailing experience. Big-name traditional retailers, with established brands and deep pockets, are expected to fare better on the Internet than their upstart predecessors. And the smart independent can follow on their coattails.

How They Use the Web

Bricks-and-clicks retailers are using their Web not necessarily for sales, but for marketing and customer relations. Here are some of the services they are offering:

Store and product locators: Often, customers don't want to buy online; they just want to know where to find a product. Many retailer sites allow a customer to search for a product online, and then point them to the nearest store that has that item in stock. This saves the retailer money, because it means that sales associates will spend less time tied up on the telephone.

Bridal registries: This is one of the fastest growing areas of online retailing. Many stores, like Target, discovered that bridal registry is the most popular feature of their site. Visitors print out the couple's wish list, and then go to a local Target to buy.

Remote stores: Retailers like Home Depot are offering Internet ordering for consumers in less populated areas, simply because there aren't enough people in those areas to justify building new stores. These remote stores are filling the role that the Sears and Montgomery Ward catalogs did for rural customers decades ago. In fact, Federated Department Stores (which owns Bloomingdale's, Rich's, and Macy's) is combining its Internet operations with its catalog businesses, in part to cut costs and reduce redundancies.

Advertising: The Internet is a massive, up-to-the-moment ad campaign that functions 24 hours a day, 365 days a year. And the public is looking at those ads. According to market researcher IDC, only 30 percent of U.S. households had Internet access in 1998. Today, 47 percent can log on, and 75 percent are expected to be doing so by 2005.

Why They Will Succeed

There are several factors that spell future success for the bricks-and-clicks operations. They boil down to the following:

The Land Grab Is Over: When the Internet was a novelty, everyone thought it was possible to open an online store and be successful. People tried to gain a foothold in this new medium with a lot of heavy discounting and very expensive marketing. (One dot-com company spent more on a single Super Bowl 2000 commercial than it had earned in sales that year.) That tactic failed, and the resultant losses forced the inexperienced out of the business, leaving the field to the old brick-and-mortar retailers.

Established Brands: Brick-and-mortar retailers already have well known brands and all the marketing skills they need. And they have the merchandise in stock.

Multichannel Distribution: With bricks-and-clicks merchants, customers can find and/or purchase a product online. They can also find and/or purchase the product at a store. Perhaps most importantly, they can return it to a store. Borders' vision is to have customers go online to see if their local Borders store has the book they want; the store reserves it, the customers drive down to the store to pick it up . and stay to sit in on a poetry reading and buy a latte while they're there.

Integrated Information Technology: Retailers have the information technology systems necessary to run their businesses offline, and by combining those systems with Web technologies, they can improve customer service and consistency in business processes. However, these retailers do face one challenge: They often handle some of their core operations with older computer systems, while their online properties are generally dependent on newer technologies. For example, Borders can't tell whether the customers who buy books in its retail stores are the same as those who buy from its Web site. But the company is building - at a cost of $1 million - a data warehouse that will pull information from multiple databases and provide a consolidated view of the customers of the Borders Books and Borders Music superstores, the Borders-owned Waldenbooks stores, and Borders.com. The process of integrating this data is time-consuming and costly.

Some Like It Separate: Bricks-and-clicks integration isn't the goal for everyone. Some companies continue to run their online and offline divisions separately. Nordstrom established a separate company, Nordstrom.com, complete with a separate buying group and a different product mix. Earlier this year, bookseller Barnes & Noble spun off its online operation, barnesandnoble.com, in a public offering. Although the parent company retains a minority stake, the information technology systems of the two operations aren't linked. Obviously, the maintenance of separate databases negatively affects customer rewards programs. Over time, these companies will learn that integration of all operations is the key to success. For example, barnesandnoble.com was offering one top-selling book for 50 percent off retail, while at the brick-and-mortar counterpart the same book was only 20 percent off.

The Bricks-and-Clicks Independent

If you're a bricks-and-clicks retailer, what can you learn from all this? What do you need to do in order to succeed?

Become Customer-Centric: Ask your customers what they want. Ask how you can serve them better. Remember that the customer sees only one of you, rather than separate online and brick-and-mortar stores.

Establish a Gift Registry: A gift registry is just like a bridal registry, except that it isn't limited to a single event; there are countless gift-giving occasions. Provide an online registration form on which customers can enter information about family members, birthdays, anniversaries, and other occasions. Use the registry to send customers e-mails that remind them of an upcoming event and offer gift suggestions. To aid you in making suggestions, encourage customers to create wish lists when they register.

List Your Brand Names: Make sure that you list all your branded products when you submit your site to search engines. If you carry Hummel, Beanie Babies, Department 56, or Russ, be sure to include them. Arrange your keywords in order of importance, since some search engines have a limit.

List With Your Suppliers: Get listed as a retailer on your suppliers' Web sites. If a customer from your area goes to the Department 56 Web site, she should be able to find your store.

Update Regularly: Be sure to post any new information you have. If you are having a sale, announce it. If you received new merchandise, advertise it.

Don't Forget the Nuts and Bolts: Give directions to your store, and be sure to post your hours of operation.

A Web site is an opportunity for you to keep your name in front of the public in a consistent, timely, and cost-effective manner. And it can be a great way to drive more traffic to your store. Hopefully, you too can be one of these successful bricks-and-clicks retailers.

George Matyjewicz of GAP Enterprises Ltd., a management and marketing 'solutioning' firm, can be e-mailed at georgem@gapent.com. 'E-Tailer's Digest' is a moderated Internet retail discussion forum, located at www.gapent.com/etailer/.