10/25/2010 10:24 am ET | Updated May 25, 2011

Clicks and Mortar Integration: Where Retail Excellence and Relevance Come Together

No time to shop for tonight's dinner?

It's not a problem if you live in the Mid-Atlantic or Southeastern part of the United States. Now you can order groceries online at and pick them up curbside at dozens of Harris Teeter stores.

With the time you save there, you could swing by Nordstrom and indulge yourself in the shoe department. Can't find your size? No worries. Just go online to and search more than 100 company store warehouses with a single click.

Isn't this what shopping convenience is supposed to be?

Harris Teeter and Nordstrom think so. And so do a growing number of other companies that are working to make your life easier by integrating their online and on-site shopping experiences. They are investing in new software systems and changing internal policies to reduce any barriers between their "clicks" operations and "mortar" stores.

This is something many have tried before but few have mastered until recently. Even at some of the nation's most successful retailers, a truly integrated experience is still a work in progress. At Best Buy, for example, items purchased online can be returned for store credit. Exchanges, however, are not yet possible.

Why the hitch? Blame it on the current gap between business excellence and customer relevance in retail. Like many companies, retailers understand that in order to succeed, they have to produce both year-in and year-out. But they are challenged by ongoing technology changes, economic pressures and evolving customer demands.

In recent years, retailers have made great strides improving their business excellence by optimizing their supply chains and rationalizing their store counts, among other things. While these efforts have steadied retailers during the recession, they haven't yielded much in the way of improved customer relevance.

But integrating online and on-site stores is. Unlike other initiatives, this work directly benefits customers, whose demands are constantly evolving. Today, consumers want to shop both online and in person when it suits their needs. Regardless of where they buy things, they want to return them wherever it is most convenient.

The only way retailers can provide this type of convenience is by integrating their online and on-site operations. This often requires a software overhaul and an organizational realignment.

Any retailer that fails to get this is apt to fall behind. But those who make the effort can benefit handsomely. Take Nordstrom again. In August, Nordstrom Direct President Jamie Nordstrom told The New York Times that integrating the company's online and on-site warehouses translated into "some pretty meaningful results." In the 11 months after the integration was complete, same-stores sales jumped 8 percent. Other factors contributed to the increase, but Nordstrom singles out the inventory change as having a significant impact.

"We can sell more without having to buy more inventory," he said. "That plays through to margins and, ultimately, earnings."

Other retailers are making changes with the hopes of achieving similar gains. At Kohl's stores, for example, shoppers who can't find items in their size or preferred color can now browse an in-store kiosk and take a peek at what's inside the warehouse. Instead of leaving disappointed, more and more are walking out satisfied.

In a bid to increase customer relevancy, many companies are now taking clicks and mortar integration a step further. Gap, J. Crew and other retailers now rely on Facebook, Twitter and other forms of social media to communicate news about store sales and to distribute retail discounts.

Then there's cosmetics retailer Sephora, the division of luxury products giant LVMH. In September, the company released an iPhone app that shoppers can download and use to read product information and consumer reviews while shopping inside its stores. As of late October, nearly half the people who reviewed the app on the Apple iTunes store gave it a five-star rating.

"I love how you can scan any product or QR code to see reviews and videos," said one customer. "Today's obsession is fresh and fun. Way to go Sephora!"

Becoming your customer's obsession? It's hard to get more relevant than that. Or more excellent. By increasing both among its customers, Sephora has out-performed its rivals throughout 2010.

And so have other retailers who have committed to doing both.

Inder Sidhu is the Senior Vice President of Strategy & Planning for Worldwide Operations at Cisco, and the author of Doing Both: How Cisco Captures Today's Profits and Drives Tomorrow's Growth. Follow Inder on Twitter at @indersidhu.