ActionWatch by AA Data Company - Action Sports Market Research

Consumers spent $108 billion shopping online in 2006. Fourth-quarter retail e-commerce sales surged 24.6% over the fourth quarter in 2005 (source: U.S. Census Dept.). This rate is significantly higher than overall consumer spending, which means that more and more consumers are shopping online as a replacement to shopping in a physical store. Some experts are expecting online retail sales to jump another 20% in 2007. If you’re a retailer, these numbers probably make you seriously consider launching an e-commerce site if you haven’t already done so. But you likely have already started selling your wares in the cyber marketplace.

And considering the numbers, why wouldn’t you? These figures make it sound like your sales associates are quickly being replaced by a computer mouse. However, there is another important figure to consider. While $108 billion sounds like a lot of money, it’s actually only 3% of total U.S. retail sales in 2006.

The PhDs out there who spend time studying business models seem to be converging on the theory that “click and mortar” (e-commerce coupled with physical locations) is the best e-commerce business model and assert that “brick and mortar” is not going to disappear. Indeed, the synergies and other benefits of having a physical location are proving to be highly valuable in creating a successful e-commerce business. However, because cyber retail can cover a much larger geographic region than physical retail (among other reasons), it is unlikely that a large percentage of brick-and-mortar retailers will be able to sustain a profitable e-commerce business unless they can offer something completely unique that cannot be found elsewhere.

So who will succeed? How many retailers can have e-commerce success if only 3% of overall sales are conducted online? Of brick-and-mortar retailers, I think only those who commit the time to learn how to market and sell online, maximize the synergies with their physical location and create a highly efficient operations system will be able to sustain a profitable e-commerce business. Researching for this article made me realize how sophisticated online retailing has become. Spend an hour reading some articles at InternetRetailer.com and you will probably come to the same conclusion. But it makes sense that Internet retailing would become quickly sophisticated – everything is so measurable!

Here at ActionWatch, a market research company, we often repeat the old maxim that “What gets measured gets managed.” With so many things being measured in Internet retailing, lots of things are also getting closely managed. When they are closely managed, the users (e-commerce retailers) demand higher and higher performance and sophistication of the tools they use. There are lots of new measurements, ratios and metrics for a retailer to learn when getting into e-commerce, but most of the old retailing measurements are also still important. And if you want to capitalize on an important synergy of the “click and mortar” business model, you will probably want to leverage your existing retail operations system which gives you your traditional measurements. As I opined earlier, a highly efficient operations system is very important to sustaining a profitable e-commerce business.

One way to help create an efficient operations system is to connect your e-commerce site to your POS system so that you can use your current system for inventory management, sales analysis and even customer management. You are already trained on this system, you have already paid for it (or are committed to paying for it), so it makes sense to leverage that asset with your e-commerce channel. This is one of the synergies of the click-and-mortar model.

Many retailers invest in POS software (a.k.a. retail management software) to help them more efficiently manage their inventory and sales tracking. However, most e-commerce sites, whether built through Yahoo Stores, eBay or a custom site, are generally focused on being a sales and marketing tool rather than an operations management tool. So wouldn’t it be great if you could set up your webstore as simply another store that you manage through your POS software!

The good new is: I’m not the first person to think of this. A number of software development companies that focus on the retail industry have created software tools that can link your e-commerce store to your physical store so they can both be managed through one interface. One of the biggest benefits of doing this is not having to re-key information into your POS, a time-consuming and error-prone procedure. Another huge benefit is being able to manage inventory across channels (virtual and physical). If you are buying from the same vendors for both channels, you need to see sales reports and inventory information with both channels combined. You also want to be able to see an inventory change reflected in both channels to avoid customers ordering an item online that is no longer available.

Danny Keith, CEO of the Santa Cruz Skate Shop organization, which includes three brick-and-mortar stores and two e-commerce sites (Skateboards.com and Surfboards.com), realized the importance of the e-commerce/POS integration when he launched in 2003. “I started with a Yahoo store and had to re-key orders from that store into my POS since I was selling inventory located in my brick-and-mortar store,” says Keith. “That lasted only about 6 months before the inefficiency was just killing me. I sped up the timeline to get the two systems integrated.”

Santa Cruz Skate Shop’s CTO, Rich Harris, adds, “The e-commerce volume wasn’t high enough to justify its own warehouse, its own buyer and its own information system. By integrating our e-commerce with our POS we could keep our overall costs lower until growing big enough online to separate the two.” Harris says they now have a separate warehouse for e-commerce inventory, but are currently continuing to use their POS system to manage it. They are using Retail Pro for their POS software and XCart for e-commerce. The software that connects the two systems was developed by Retail Dimensions and, according to co-founder Paul Duncan, can connect Retail Pro with any online shopping cart that uses a relational database such as StoreFront, XCart and many others.

UniteU is another e-commerce platform that is designed to connect with Retail Pro. Steve Price from Killer Dana says that they have been using UniteU in combination with Etail Manager from Retail Backbone since 2004. “UniteU is a great product that has worked really well for us,“ commented Price. “The guys over there are really smart, and they’re good at figuring out ways to make it work for you.”

Quickbooks POS is another very popular retail management system in our industry. I did a quick online search and found five third-party software developers that offer an integration tool to connect Quickbooks POS and an e-commerce site: Atandra T-HUB, Actinic, PDG Software, IA Modules and POS2Net. A similar search for Microsoft RMS also produced a few results including New West Technologies and Objectware Inc. among others.

Some POS systems have been created as web-based software, which obviously makes for a seamless integration with an e-commerce store. CompanyBe (www.CompanyBe.com) is an example of web-based POS software that has been gaining a lot of momentum in our industry. One reason for their success is the amazing talent of their lead developer, Bruce Van Horn. I have worked with a number of software developers but was especially impressed with Bruce’s speedy programming abilities when he added an automated reporting function that allows CompanyBe clients to effortlessly participate in the ActionWatch market research program. Other systems, such as Volusion and Order Manager by Stone Edge Technologies, are designed primarily as an e-commerce platform but also include a POS component that can be used at a physical store.

With the growth of e-commerce, retailers have been begging their POS developers to build e-commerce integration tools for many years. And most of them have responded by now. If you already are using a POS system with which you are relatively satisfied and also have e-commerce or are considering launching an e-commerce site, one of the many things you should do is contact your POS vendor and ask them about the integration tools currently available. Of course, you can also plug in the name of your POS software and “e-commerce” into Google and you’ll probably find a number of sources to contact. But if you are wanting to succeed in the e-commerce arena, one of the many things you should consider is making your operation more efficient by integrating your POS and e-commerce platforms.

These items are 3^rd-party offerings. If I could find only e-commerce integrations offered by the POS developers themselves, I did not list them.

Retail Pro

Retail Dimensions

UniteU

Etail Manager from Retail Backbone (retailbackbone.com)

Quickbooks POS

Atandra T-HUB (atandra.com)

Actinic

PDG Software (PDGSoft.com)

IA Modules

POS2Net by NetStores (pos2net.com)

Microsoft RMS

StyleTeks

Web Integrator from New West Technologies (newestech.com)

PowerShop by Objectware Inc (objectwareinc.com)

StoreFront’s Data Integrator

E-commerce software that also includes a POS interface

Volusion (volusion.com)

Order Manager by Stone Edge Technologies (stoneedge.com)

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