The McKinsey Quarterly writes that there are three types of online retailers. The efficiency type of retailer who must cut, cut, cut every bit of efficieny out of the sale and often spend a lot on branding and marketing. Companies likes this are Amazon.com and Dell. They sell commodity items that have very little profit margin.
Then you have companies like L.L. Bean who sell higher priced items and are niche players. Not nearly as large as HUGE online retailers but doing quite well and profitable.
The last group are the “tripple” plays. The McKinskey Quarterly reads These companies use the Internet both to draw customers to their physical stores and to offer shoppers a wider selection of goods and greater convenience. Traffic drivers, such as Target, The Home Depot, and Wal-Mart Stores, attract shoppers using a variety of techniquesógift cards, rich-media advertisements, online circulars, and e-mail notification.
As these models indicate, retailers that analyze all their channels and make thoughtful, strategic choices can enjoy exceptional results. Today’s top Internet retailers understand the need for complementary on- and offline strategies, coordinated marketing, and balanced investment. Without an integrated strategy, store-based retailers seeking to boost sales through the Web or catalogs risk simply shifting sales volume to these direct channels and destroying profitability because of the added costs of fulfillment and overhead. To succeed, multichannel retailers must coordinate their online, catalog, and store activities to convert customers and encourage them to spend more. Such retailers must also develop efficient processes for capturing and fulfilling orders and ensure that consumer insights are shared across all parts of the organization.
Read the full McKinsey Quarterly article here.
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