The Economics of Multi-Channel Integration

Managing channels separately might not damage customer relationships but also increase costs unnecessarily. The costs of running separate order-tracking and customer service operations, operating multiple warehouses and fulfilment systems, employing buyers and merchandisers with overlapping skills, and building multiple brands is high. ^[13] Given the potential of significant operational cost savings, the economic argument for consolidating infrastructures, management functions and technology through multi-channel integration is strong. Efficiency savings will directly affect the bottom line. Integration can improve service levels but also lower cost to serve. However, such cost savings may require high initial investment: Forrester research into 50 financial services organizations, to determine the cost of channel synchronization, revealed that 58 per cent of these firms believed that implementation of such an integration strategy would cost at least US $1 million per year, with 16 per cent spending more than US $20 million per year. ^[14] So failure to plan properly may result in no cost benefit, or at worst actually significantly increase costs. For example, a move to self-service over the Internet may increase call centre load and reduce profits temporarily. Consideration must be given to the costs of integrating new e-channels with 'legacy processes and systems, new fulfilment processes, origination and management of the online catalogue and supporting text and pictures and customer-service staff'. ^[15]

So companies need to ensure suitable ROI from their multi-channel investments. Scenario analysis should be combined with testing and piloting where possible to develop a business cases to ensure an adequate return on investment. Ultimately channels must be used selectively, according to their strengths and customer preferences. A balance must be struck between growth, effectiveness, cost control, and centralization and channel autonomy on the other.