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E-Commerce: Hazardous to Your Wealth?

Can going online be a hazard to a retailer's financial health? Quite possibly, at least according to a recent industry study that found that encouraging customers to go online leads to a decline in customer loyalty, referrals to friends and over the long term, a decline in profits.

"Taking relationships online requires more than technical capability," said Jim Barnes, executive vice president of consulting company Bristol Group and author of "E-business at the speed of like: a report from the future."

"As customers have told us, it's still about how we make them feel. Our basic online strategy must reflect our commitment to genuine relationships, not technology-driven transactional encounters," Barnes said.

The study, which examined Internet business relationships in the United States, Canada, Ireland, and the United Kingdom, concludes that the key to ensuring long-term retail success, both online and off-line, lies in the relationship that retailers have with their customers.

Rather than focusing on the technology that makes e-commerce possible, retailers need to focus on the customer relationships that are at the heart of their business.

"This may be a classic case of 'ignorance is bliss'," said Barnes. "In the short term, many retailers are generating a lot of additional revenue because of their online customers. But if their customers don't feel any loyalty, they are just as likely to shop elsewhere the next time."

The North American component of the study, which surveyed almost 1, 600 adult residents of Canada and the United States, concluded that over 60 percent of off-line customers say that they are very likely to continue to buy from any particular retailer, compared to only 43 percent of online customers.

Barnes concluded that retailers must develop online strategies that focus on more than just price, access to inventory, speed of shipping and other distribution issues. "Customers need to feel that the retailer understands their needs and will provide a human touch when necessary."

E-business at the speed of "like": a report from the future is available in its entirety at here.

Bristol Group is a marketing communications and information consulting firm with a speciality in customer relationships.



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