Retail, in the eyes of the everyday customer

Every time the cash register rings two kinds of analysis are possible. The traditional way is to look at the transaction itself (size, frequency, category etc). The alternative is to measure everything leading up to the purchase; things like, other products considered, time taken to make purchase decision, customer history etc. Retailers should look at both.

My previous post about bluenile.com has gotten me thinking. The fact that an online retailer (with 0 offline stores) is able to generate 5 times the online revenue of its closest rival (which happens to have 2,700 offline locations) should be a lesson to retailers who believe selling online is hard because browsers can do a Google searches to find cheaper alternatives. Maybe it’s just me but when I find the right product I don’t try any harder to find price alternatives online than what I would in a retail store. If that were the case I’d have set walmart.com as my homepage. The truth is that online customers are no different from their offline brethren.

The other fact that retailers often forget is that brand loyalty is not something that only benefits them; it also benefits discerning customers because it allows then to build a trusted network of sources for products and services. To assume the same customer would be loyal offline but not online is flat out wrong.

Compelling online experiences (not traffic) drive sales. Consider a company like BlueNile.com which is able to generate annualized web revenues of $169 Million through just 739,000 online monthly visitors. Translation: every customer that walks into bluenile.com (with or without an intention to buy) ends up spending $19 dollars (and change) at the store. That’s a really big deal and I believe it is heavily influenced by BlueNile’s ability to create a truly compelling and differentiated online experience. Instead of throwing money at just bringing people to their site BlueNile has chosen (quite wisely) to focus on making sure that those in their store end up buying.

Update: Since I wrote this post I received serious flack for my elders. They attribute this $19/visit to the expensive items at bluenile.com. I disagree. This figure was derived by a numerator (revenue) and a denominator (buyers). Because wedding rings are a high consideration item it follows people look around quite a bit. This inflates the number ‘just browsing’ visits (denominator) to bluenile.com thus effectively canceling the effect of the numerator. Comments? opinions? please share.