Thursday, February 02, 2006

Time to invest in online operations

Greets all. Well the first of the year is off with a bang and by almost all accounts major retailers were effected by online retailing for the holidays. There are numerous reports of how much online retailing grew in 2005, but I think that this article from eMarketer and this one from Internet Retailer sum it up pretty good.

With the future so bright that you're gonna need shades (ewww... corey hart 80's reference) some of the forward thinking retailers have seen their investments in their online/multi-channel retailing efforts pay handsome dividends. BestBuy's Sam Taylor for example just told Internet Retailer this week about their 2005 Gift Card and Gift Center efforts driving significant holiday gains. Circuit City's "24 minutes or $24 gift card" promotion brought to the forefront their multi-channel abilities, and has been a key in a positive. And of course, the darling of the online world smashed even their own estimates for 2005 by posting $370 million in online sales.

What all of these have in common, along with many other retailers is that they made significant investments in their online operations and infrastructure starting as far back as 10 years ago. They also continue to shift resources ($$$'s) from their traditional business and marketing efforts to where their significant growth is: Online and multi-channel retailing. There's no better example of someone "getting it" than what Federated announced this week. They are going to spend $120 million over the next two years to open a new "direct business" distribution facility, and completely revamp their online/direct retailing infrastructure. Federated realizes that their core business, the department store, is fading fast and if they do not transition to a full multi-channel model, they will be completely left behind.

So... what is the lesson to be learned? If you're planning to succeed in retailing, the double-digit growth is online not offline. The combination of both (multi-channel) is even more efficient and is increasingly they way for traditional brick-based retailers to go. Your marketing, your merchandising and your technology infrastructure need significant investment now, or you will be passed by. Does your budget reflect supporting this double-digit growth potential or are you still spending the vast majority of your budget on traditional and slower growth efforts?

Good luck in 06, and happy retailing.

PS: to any of you who were in Atlanta for's First Look at the last minute, I was unable to attend. More on that later, but I hope that all of you who did attend havd a great show.

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