How REI scaled e-commerce mountain

When outdoor equipment retailer REI wanted to boost in-store sales, the company looked to its Web site. In June 2003, launched free in-store pickup for customers who ordered online. The logic behind that thinking: People who visit stores to collect their online purchases might be swayed to spend more money upon seeing the colorful displays of clothing, climbing gear, bikes and camping equipment.

REI’s hunch paid off. “One out of every three people who buy something online will spend an additional US$90 in the store when they come to pick something up,” says Joan Broughton, REI’s vice-president of multichannel programs. That tendency translates into a healthy one per cent increase in store sales.

As Broughton sees it, the mantra for any multichannel retailer should be “a sale is a sale is a sale — whether online, in stores or through catalogues.” The Web is simply not an isolated channel with its own operational metrics or exclusive group of customers. As the Web has matured as a retail channel, consumers have turned to online shopping as an additional place to interact with a retailer rather than a replacement for existing channels such as stores or catalogues.

According to Jupiter Research, while its online sales prediction for 2008 of US$117 billion represents only five per cent of total retail sales, the company estimates that 30 per cent of offline sales will be influenced by the research that consumers conduct online. Essentially, that means retailers will need to leverage their online properties in ways that are synergistic and complementary to their offline operations.

Adopting a complementary strategy means focusing on “the continuum of the shopping process,” says Jeff Schueler, founder and CEO of Usability Sciences Corp., an online usability-testing company. The Web has evolved to become an important part of the shopping continuum, and smart retailers such as REI have mixed IT and marketing to maximize its complementary role.

To effectively leverage the channel continuum, companies must pay close attention to why people are coming to their Web sites. Most shoppers, Schueler says, follow a predictable sequence of steps before they make a purchase. Making a purchase is really the culmination of the shopping process. The first steps — information-gathering and price comparisons — are ideally suited for the Web. In fact, 86 per cent of people go online to gather information, comparison shop, get coupons or conduct self-service tasks such as paying bills or checking the status of an order, according to Schueler. Only 14 per cent go online to purchase. Any given Web site should therefore not be considered an endpoint for shopping.

At REI, a cooperative with 2 million members, many products for sports such as climbing, mountain biking and skiing are technical. Customers not only want to research before they buy, they want to try before they buy. To that end, REI views the Web site both as a sales channel and a driver to stores. Free in-store pickup for online orders is a strategy specifically designed to get people into the stores.

And to make that strategy as cost-efficient as possible, the company uses the same trucks that restock its stores to fulfill online orders slated for in-store pickup. To make this work, REI had to integrate order information from the website and replenishment orders from stores at its distribution warehouse in Washington state. uses IBM’s Websphere e-business platform that runs on an RS/600 with an Oracle database that interfaces to an order-processing system. The AS/400-based order-processing system is used throughout REI, including the store replenishment process.

In and of itself, integrating the two types of order information wasn’t complex, says Brad Brown, REI’s vice-president of information services. What was difficult, however, was coordinating fulfillment of both online and replenishment orders because “orders placed on the Web (by customers) are nothing like replenishment orders that stores place,” he says. Online orders are picked from the warehouse at the time of the order and then put in a queue until the appropriate truck is loaded, whereas store orders are picked by an automated replenishment system that typically picks orders at one time based on either a weekly or biweekly replenishment schedule.

To make in-store pickup a reality, Brown’s group wrote a “promise algorithm” that informs customers of a delivery date when they place an online order. Timing can get tricky when orders are placed the day before a truck is scheduled to depart the warehouse with a store-replenishment delivery. For example, if an online order is placed on a Monday night and a truck is scheduled to depart Tuesday morning, the system promises the customer a pickup date of a week later, as if the order would be placed on the following week’s truck. However, REI will shoot for fulfilling the order that night; if it can do it, REI (and, ultimately, the customer) is happy because the order arrives sooner than was promised.

REI has also expanded its multichannel philosophy to include services. In February, the company launched an integrated gift registry that allows people to set up gift lists and enables Aunt Tillie, for example, to purchase requested items in any retail channel. The registry also allows consumers to post messages to other site visitors, seeking information or specific, hard-to-find products. Customers can create a gift registry in one of two ways: They can use a kiosk or scan products with a handheld device. They also have the option of registering for gifts by calling customer service or going through Once a registry is set up, REI sends e-mails to a designated list of recipients, complete with a link to a personalized registry page. According to Brown, the registry is a way to expand sales among consumers who don’t traditionally shop at REI.

Creating effective business-to-consumer retail Web sites entails more than simply calculating sales figures. It’s about delivering the functionality that users expect and using the site to drive sales through other channels. And only IT integration can make this happen.

SIDEBAR: Online Customer Service: The Basics

What every online retailer should provide its customers

When it comes to converting shoppers into buyers, a good customer experience is the number-one indicator. Unfortunately for retailers, there’s no magic formula for ensuring a good experience. Consumer expectations vary widely depending on products; shoppers of commodities such as books and CDs tend to go online to buy a specific title, while those in the market for technical gear such as audio equipment are looking for product information and price comparisons.

Shoppers are fairly resilient when it comes to sporadic performance problems, says John Lovett, senior performance analyst with Gomez, an Internet performance company. “If a customer experiences slowness or a broken page once in awhile, they’ll return to use that channel,” he says. What shoppers can’t tolerate is inconsistent performance, recurring navigation problems and unexpected mishaps, such as completing the order-entry process only to learn that the product won’t ship on time.

In light of that, Kate Delhagen, vice-president of retail research at Forrester Research, offers these basic elements that every retail Web site should include:

– Clear navigation that takes consumers to relevant products within a few clicks

– Product detail pages with all information needed to make a purchase, such as images, ratings, inventory status and so on

– Easy and intuitive checkout process

– Shipping and tax fees clearly displayed before credit card submission

– Order and shipment status tracking capabilities

– Follow-up e-mail after the expected shipping date

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