Rethinking The Multi-Channel Strategy In A $3/Gallon Gas World

Written by Evan Schuman
August 15th, 2006

As gasoline prices continue to soar to ludicrous heights and consumers get more comfortable with E-Commerce, some retailers are starting to question what to push?and play down?this holiday season.

As gasoline prices continue to soar to ludicrous heights and consumers get more comfortable with E-Commerce, some retailers are starting to question what to push?and play down?this holiday season. For example, the popular shop-online-pickup-in-store and buy-online-and-return-at-the-store both end up forcing the consumer to use up that precious gas. Do these kind of approaches merit being thought through again?

Two unrelated surveys released on Tuesday?one from Harris Interactive that was paid for by vendor Newgistics and the second from BigResearch that was paid for by the National Retail Federation–beg that question.

The Harris/Newgistics survey found that “given the option to return purchases directly from home with a pre-paid label, home shoppers are nearly five times as likely to shop with the retailer again as those who are restricted to a return process that requires travel to a mail center or drop box. Alternatively, if a return process requires consumers to travel to a mail center or drop box, only 13 percent of adults who shop from home would be very likely to shop with the retailer again.”

Granted, that research was paid for by a company that offers just such a ship-from-home service so I’m giving too much weight to the numbers, but there can be little doubt that gasoline prices make those stats quite reasonable and plausible.

The NRF survey focused primarily on a surge in expected electronics purchased for students returning to college. (That part of the survey prompted many cries of “You paid how much for that research? You couldn’t have figured that out of your own?”)

But it also explored an interesting brick-and-mortar impact of the rising gas prices: a sharp drop in expected traffic for smaller retailers with much more going to one-stop-shopping locations for college purchases. Discount stores took a hit, down to 51.8 percent this year compared with 55.8 percent last year, drug stores dropped to 10.9 percent from last year’s 12.8 percent, office supply merchants dropped to 38.8 percent from 41 percent last year and college bookstores dropped to 56.8 percent from last year’s 59.8 percent. One of the worst hits was “In fact, the only two sectors that will see an increase in traffic this year include department stores (36.1 percent last year versus 39.3 percent this year) and specialty stores (20.8 percent versus 23.5 percent),” an NRF statement said.

?As consumers remain concerned about gas prices, they are more inclined to scale back on the number of stores they visit,? said Phil Rist, Vice President of Strategy for BIGresearch. ?College students, who are some of the most technologically-savvy shoppers, will likely use the Internet to look for prices and research merchandise before setting foot in a store.?

Whether its going to fewer stories or trying to eliminate brick-and-mortars at all, this year’s holiday season is likely to look quite a bit different from last year’s. Alternative payment methods are becoming much more mainstream, as evidenced by the Aug. 16 announcement from Barnes & that it will be accepting PayPal.The shop-online-pick-up-in-store has always struck me as an excellent idea on paper, but one that didn’t cleanly translate to the realworld. It’s subjecting the consumers to the long lines, the traffic and the gas prices that they are trying to avoid and it’s typically not free from technical glitches.

But the ability to return unwanted online purchases to brick-and-mortars still makes a lot of sense, even with soaring gas prices. Often, the consumer has to drive no matter what, so whether it’s driving to the Post Office (or MailBoxes Etc.) and waiting in their lines or driving to the retailer and waiting in the retailer’s line, it should make little gas-cost and inconvenience difference. The Post Office route, however, forces the consumer to use his/her own packing material and to do their own packing (or to pay someone else to do it). The retail return typically requires a lot less effort.


One Comment | Read Rethinking The Multi-Channel Strategy In A $3/Gallon Gas World

  1. Andrea M. Pace Says:

    This sounds like a win-win situation for pure-plays and retailers that also have an online presence.


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