By Paul Lima

So this is what it comes down to: after the e-commerce excitement died down and the “web changes everything” proclamations grew old, companies are once again investing in bricksand-mortar (B&M) outlets to attract consumers who are still uneasy withonline shopping.

Does that mean the Web is out? No way. In fact, online sales continue to climb and many of the computer systems that drive e-commerce sites are being stretched to serve traditional channels.

In fact, many of the companies that have chased the double pendulum of business and technology trends are now learning a valuable lesson: Grandma was right—a little of everything and everything in moderation.

Shopping styles

Even in this uncertain economy, a lot of shopping takes place online.Web sales are growing year over year, said Kurt Ritcey, a principal with Deloitte Consulting in Toronto.

However, as a retail channel, the Web is growing “more slowly than many people thought.” And that means strategies have to be retuned.

Some are using their Web infrastructure to bolster traditional means of reaching customers. But selling to customers the B&M way does not mean abandoning the Web.

Just ask Just White Shirts (JWS), an online haberdasher specializing in white shirts and a growing line of casual attire, which went from a traditional catalogue retailer to an e-commerce company and then to B&M. Their adoption of the Web was a natural way to host an order catalogue. But unlike many neophyte e-com companies, Toronto-based JWS already had order-fulfillment and product-distribution systems in place. Now the company not only has a catalogue and a Web site, it also has two recently-opened, oldfashioned B&M retail outlets.

But wasn’t the Web supposed to eliminate bricks-andmortar and shop assistants? “I like to do things backwards,” said Leon Goren, JWS president and CEO.The retail outlets have allowed JWS to reach consumers who are not interested in buying online or through catalogues. “The Web and catalogue are still not hitting 90 per cent of the market.”

The first JWS store “was a natural addition,” Goren said.

Customers who bought items online or through the catalogue picked up orders at the company’s downtown head office, so early in 2000 JWS opened an outlet store to take advantage of the traffic.

The store soon generated $2,000 to $3,000 in sales per week—buys that tended to be impulse in nature so did not cannibalize online or catalogue shopping. The head office store was renovated and re-opened in September 2000 and a second JWS retail outlet opened last December in the heart of Toronto’s financial district.

A retailer like JWS “needs to plumb volumes to make money,” said Ritcey, who predicts JWS will do well in Toronto’s downtown core. Its target market has always been affluent business executives, and the location caters to them.

The B&M sites also drive traffic to other JWS channels. Once customers walk into a store they are more inclined to pick up a catalogue or place an online order. “The stores help consumers get over their apprehensiveness of placing orders online,” Goren said.

JWS also drives up Web visits by using permission marketing; a B&M customer’s name, address and e-mail address are integrated into the JWS customer database and buyers receive e-mail promotions if they give their permission.

“The whole idea is to reduce the advertising budget, so the stores become acquisition tools for online customers,” Goren said.

There are other benefits to doing things backwards. JWS retail outlets are connected to the inventory and orderfulfillment database that serves the Web site. The back-end infrastructure can support five to seven stores and if the economy hadn’t fizzled, JWS might already have expanded B&M operations. But Goren hasn’t ruled out more stores or specialty boutiques within department stores in the future.

On the line

At the other end of the spectrum, online food purveyor Grocery Gateway has no intention of opening B&M stores, although John Mozas, marketing vice-president and cofounder of the Toronto-based company, pointed out he would “never say never.”

Grocery Gateway has, however, opened the phone lines for customers. It created a paper catalogue and established a call centre—pricey items that pundits predicted the Web would eliminate.

“Our business has grown dramatically over the last 12 months. We wanted it to grow faster,” Mozas said. The company is betting the call centre will help that process.

The online grocer has been a notable e-commerce success story, delivering groceries to 85,000 of the 1.7 million households in the greater Toronto area that it covers. Now the challenge is getting to the rest of those addresses.

Many consumers are still uncomfortable with the Internet, but letting them order by phone “puts us out there for those folks,” he said.

And why not? After all, the company makes thousands of deliveries to homes, businesses and institutions each day, so the fulfillment infrastructure is already in place. Once customers receive the orders they phoned in, Mozas hopes they will become more adventurous and use the Web—still a more cost-effective way to take orders.

Either way, none of the back-office procedures change.

Orders placed through the call centre move into the same fulfillment system as Web orders.

Some B&M casualties

While some dot-com companies are using additional retailing channels, others are deserting B&M operations. This is due, in part, to the rise of the Web as a viable sales channel.

For instance, Markham, Ont.-based IBM Canada has shut down nearly half of its 29 stores.The rest seem destined to follow.

The decision to terminate B&M retail operations in Canada, the only country where IBM had retail stores, can partly be blamed on the economic slowdown and sluggish PC sales. More and more of the retailer’s customers are buying personal computers on the Web or using the telephone to place orders, said Ayman Antoun, IBM’s director of personal computing.

IBM also recently stopped supplying computers to consumer electronics retailers such as Best Buy in the U.S.

The company, though, has no intention of abandoning its reseller channel, as resellers tend to service small-business customers who often make more complex computer purchases (such as computer networks) and require training and installation support.

For others, the Web offers an alternative channel for products that have traditionally sold in retail outlets. Barry Shafran established Cars4U.com to let customers browse and price cars and even put down deposits over the Web.

Customers can find the exact price (including delivery, other charges and taxes) of vehicles online and pricing is “dynamic,” he said. If a customer changes options or increases the down payment, then monthly payments or lease rates also change.

Online bells and whistles aside, trust is an important part of selling cars. Cars4U customer-service staff members deliver vehicles to the customer’s door or meet buyers at dealerships so they can shake hands and “troubleshoot” any problems that may arise, Shafran said.

Shafran initially targeted southern Ontario and is expanding slowly, even though the dot-com theory once seemed to be “spend as much as you can as quickly as you can, and hope you win the world.”

Shafran is optimistic about the future because he feels he hasn’t over-extended his online division. Instead of trying to conquer the world, he used the Web to build another sales channel for his business gradually.

And he’s investing in last century’s distribution model: Cars4U just bought two new Mazda dealerships. The move is part of a strategy to acquire auto dealerships while continuing to use the Web as an interactive tool that lets customers browse, price and make down payments on autos.

Far from replacing all other sales channels, the smart money from Cars4U, Grocery Gateway, JWS and others is on offering some customers the Web, some the phone and some a greeting and handshake as they walk in the door.

W e b c o m b o

Cars4U http://www.cars4u.com
Deloitte Consulting http://www.dc.com
Grocery Gateway http://www.grocerygateway.com
IBM Canada http://www.ibm.com/ca
Just White Shirts http://www.justwhiteshirts.com