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Thursday, December 8, 2005
Customers found on the Web
Off-mall and on-mall are meaningless terms on the Web, where America's retail giants go head-to-head every day.
For Federated Department Stores' Macys.com division, an April 2005 decision to enter an affiliate relationship with Amazon.com put products from the Cincinnati-based retailer and other rivals such as Nordstrom and Target in the middle of one of America's biggest cybermalls.
The Web is the only real estate where the department store giants consistently butt heads, though Macy's approach to Amazon is far less aggressive than, say, Target's, which is featured prominently on the opening page at Amazon.
A customer has to search the site to find the Macy's product or storefront on Amazon, and that's because this affiliate program is not just about sales, and, in fact, is hardly about sales at all.
"Frankly, it's a customer acquisition vehicle and that's where it's been working the best," said Kent Anderson, the San Francisco-based president of Macys.com, the online component of the Macy's brand.
"We are able to determine that there are customers that started a relationship with us at Amazon and now they come directly to us (at Macys.com). These are power shoppers with higher degrees of frequency and a larger-than-average shopping bag."
While Macy's has stores in malls, where they are the anchor tenants, Target has standalone stores separated by hundreds of yards if not miles from the nearest Macy's.
But the Amazon.com site puts these retailing giants side-by-side - separated only by mouse clicks, not traffic lights and miles of traffic-clogged roads.
Affiliate programs vary widely, according to Jeff Sherwood, chief executive of Bigwords.com, an Annapolis, Md., company founded in 2001 that offers Web-based price comparisons for college textbooks and has an affiliate relationship with Amazon.com.
"In a normal affiliate relationship, commission rates range from five to 20 percent of the sale," Sherwood said.
"Amazon has millions and millions of visitors and by being in the searchable catalog at Amazon, it allows Macy's to benefit from that large customer base."
Other retailers such as Target are likely to offer a broader inventory at Amazon than what might be in their stores.
"On the Web there may be more overlap between Macy's and Target," said retail expert Edward Weller, an analyst at Think Equity Partners in San Francisco.
"There's no reason that Target couldn't carry on the Web site something that it would not consider carrying in its stores."
Target is prominently displayed as "Featured Partner" on the front page of the Amazon.com Web site, along with Wine.com and Babiesrus.com.
Other front-pagers are Officedepot.com, Toysrus.com and Shutterfly.
Though Macy's products are sold at Amazon.com, visitors must search for a Macy's product before they would even know that Macy's has a commercial footprint on the site.
The Amazon.com program remains a proprietary experiment, said Anderson, so he would not comment on traffic, revenue or customer acquisition.
He said it is not the only cyber-pilot project under way at Macy's.
"We tried marketing using the instant messaging channel on Friday after Thanksgiving," Anderson said. "We received over 600,000 clicks from that marketing vehicle."
Anthony Gardner, principal at Charter Consulting, a Chicago-based management consulting firm that opened offices in Cincinnati in 2003, predicted that Macy's will be doing more - not less - Web-based marketing in the months and years to come.
"Macy's got where they are today through consolidation," Gardner said. "But what do you do after consolidation?
"You must surround your target customer and to surround them effectively you need to be where that target expects you to be and sometimes where they don't expect you to be."
The cost of acquiring a new customer for Target and Macy's can be a steep line item.
Not so on the Web.
"It costs almost nothing," Gardner said.
"Once you click to Macys.com, one of the first things you notice is a sign-up for the newsletter. Most companies have gotten a lot better about targeting customers with those kinds of e-mails."
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