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The Holy Grail of Online Shopping

By farl in Culture
Fri Nov 17, 2000 at 05:09:30 AM EST
Tags: Culture (all tags)
Culture

With the recent explosive growth of Internet based marketing, many retailers are concerned as to how these new technologies will affect their businesses. While the Internet offers many great services, consumers still place a lot of importance in actually seeing, touching and trying out goods and services before buying them. Also, certain goods and services are not suited to be marketed effectively over the Internet. With most businesses, their products and services tend to be oriented towards a certain niche in the market, and as such, the Internet can help their business, without necessarily replacing their physical storefront. Owners of shopping centers should see the recent "E-Trading" trends as an opportunity to enliven their shopping centers with more entertainment options, and to help provide a greater draw for consumers.


The world of online shopping has only just begun. For the year 2000, the total dollar value of all online purchases, combined with web influenced offline purchases, will be $235 billion, according to Jupiter Communications. In the year 2005, they are predicting that that total will rise to over $831 billion. In 1999, 43% of all U.S. retail spending came from Internet users. In 2005, that number will rise to 75% of all U.S. retail spending. According to Forrester Research, almost 60% of wired 16 to 22 year olds use the Internet for research in connection with entertainment spending. This year alone, online shoppers will likely spend more than $61 million over the Internet.

For businesses in today's fast-paced world, saving time is integral to being successful. The traditional brick and mortar businesses are faced with trying to compete with the ultimate in time management and convenience-online Internet shopping. Customers no longer have to fight the crowds and physically shop - they can sit in the comforts of their own homes and offices and buy whatever they want, whenever they want. If you want it, you can find it and buy it. However, numerous problems abound in this pretty picture. From issues of security concerns and fraud, to warranties and lost merchandise, buying over the Internet can lead consumers a merry chase if they encounter difficulties, because a well-structured Internet store might not have a physical address that consumers are able to track down physically. While this helps the actual business save money, it reduces the level of confidence that the consumer has in the product. A physical storefront is the best avenue that any consumer has to solve any problems that might arise with their transactions.

Close to a third of goods and services can easily and successfully be marketed online. Commodity goods mainly sell close to cost price with very little value added by the retailer. Increasingly, retailers also offer further incentives for consumers who buy these items online. For example, Radio Shack, opened its first "web store", RadioShack.com, in Aurora, Colorado in March of 2000. The store features interactive pods connected to the RadioShack.com web site that allows in-store customers to access the complete web site. This store offers the same 22,000 products found on the web site. This allows for convenient access to more products that can physically fit in to the typical store space, while supplying efficient means to get the product to the customer. While these types of items are perfect for Internet based marketing, there are many unique items that can only truly be shopped for by physically contacting a retailer. This adds a world of value to the consumer. specialty apparel, works of art, unique and custom items, and items that require a physical inspection before purchase, would fall into the category of items which are not generally suitable for Internet based marketing strategies.

Many retailers are concerned about how online trends are going to affect traditional businesses. Many of them are quickly jumping online in order to help avoid the risk of being put out of business. In order to compete with the convenience of their competitor's use of online shopping, they must provide similar methods for their customers too. Through the use of Internet-based technologies, kiosks, catalogs, call centers, and other modern marketing tools, these retailers must provide an experience that is quick and efficient. According to Deloitte & Touche, 49 of the top 100 retailers had developed web sites by February of 2000. These web sites give the consumer a chance to tour the merchandise from the comfort of their own computers before actually having to make a decision to buy. The consumer can then pick out a few items that they would like to come see in the shop, or buy them directly over the Internet if the retailer offers that option. This process saves both the consumer and the retailer valuable time that would have otherwise been wasted in showing and touring the merchandise in the shop. However, according to Forrester Research, 66% of all web shoppers abandon their transactions before they complete it. This is to be expected, because many consumers use their online shopping carts to get an estimate of the total cost of their prospective purchases. While they do not actually intend to buy it online, it is a useful way for them to find out the total expected price for a set of purchases that they wish to make at the physical storefront.

Traditional shopping malls will now be wired with high speed Internet access. This will allow stores to add multimedia kiosks, web videocasts and other online marketing tools. These new malls will shift from commodity goods like books, toys and computers, which are far more conveniently marketed on the Internet, to more fashion-, entertainment- and service-type industries. The current method of placing similar use tenants sporadically throughout a mall in order to ensure foot traffic throughout the mall, will soon be obsolete. Malls will need to begin clustering competing stores together for added convenience to the shopper. Consumers will want to be able to find their products in a far more convenient manner.

One of the most important aspects of how the Internet will be affecting businesses, is in how the World Wide Web levels the playing field between the smaller retailers and the larger, chain retailers. One of the most useful aspects of the Internet is that almost anyone can have an online presence for close to no cost outlay. Also, the expenses involved with creating an online presence are marginal when compared to physically marketing your business and products through direct mail, media advertising, or other traditional methods. With the ease of use of the Internet, small businesses can have presences on the World Wide Web that matches the online presence of larger businesses. All the technologies that the larger companies use are readily and cheaply available to anyone who wants to implement them for themselves and for their own businesses on the Internet. To the consumer, all they see is the interface for the business. This helps smaller stores gain credibility, a 24-hour-a-day, 365-days-a-year marketing team, and an easy way for customers to learn more about the products of that business, without having to expend any real effort on their part. In this way, smaller retailers can focus on providing great service and products in their storefronts, while handling most of their advertising over the Internet.

At one point in time, analysts and experts declared the emergence of the "VCR" would be the death of movie theaters. Today the Movie Theater Industry is still thriving. Likewise the Internet will the marketplace, but in a way that will complement the traditional shopping centers. Landlords are already beginning to transform their shopping centers to entertainment and convenience based complexes. At the beginning of this year, Albertsons in Seattle began to transform their traditional layout of their stores to devote 50% of their storefront to Internet-based ordering, delivery and pick-ups. San Diego's HomeGrocer.com recently began to serve the Greater San Diego area and already they are exceeding their expectations for growth.

The Internet is a considerable boost to businesses in today's market. But in most cases, it cannot replace a physical storefront. It is a useful marketing tool that will help businesses grow larger faster, while at the same time saving them money and time that can be better devoted to improving their storefronts, product lines and services.

In order to promote discussion, do you think this model is valid? How has where you worked integrated their physical location with an online location? Is your physical location even needed anymore?

Farl
farl@sketchwork.com

PS> Note to those in charge: a COMMERCE topic or section would be nice.

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Poll
Is online shopping a replacement for brick-and-mortars?
o No. It helps them. 21%
o No. It makes no difference. 9%
o I don't know. 10%
o Both are necessary to succeed today. 35%
o Yes. It makes business easier. 9%
o Yes. It totally makes a physical storefront unnecessary. 3%
o I've never worked in retail so I have no opinion. 9%

Votes: 84
Results | Other Polls

Related Links
o Jupiter Communications
o Forrester Research
o Radio Shack
o Deloitte & Touche
o Albertsons
o HomeGrocer .com
o Also by farl


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The Holy Grail of Online Shopping | 27 comments (12 topical, 15 editorial, 0 hidden)
The future of the web is not retail (2.57 / 7) (#4)
by sugarman on Thu Nov 16, 2000 at 05:23:27 PM EST

Nice article. Well written, argued, backed up, and wrong.

The future of the web-business will not be retail. It will be business to business.

Dot-com retailers are dropping left and right yet tyhere is still a push towards driving businesses to the net. What has happened is that the older, slower, more traditional busineses are seeing where e-commerce works for them, and it is not about pushing units to the average Walmart shopper. The margins are too low in that type of business to stay competitive.

Where net commerce is picking up is in the behind the scenes transactions. Internet stock trading is one example. These are not 'consumer goods', yet a lot of business is done with them online. Big businesses can place regular orders for consumables (office equipment, vehicle leasing, stationery, contractors) online, and then proceed to follow through with invoicing and payment via the web as well.

This is where those quoted figures on e-business are coming from. It has nothing to do with showrooms being replaced with web-portals, and everything to do with large B2B contracts that happen behind the scenes. These also constitute 'web commerce'. Retail web-commerce is just the shiny stuff that everyone thinks of, rather than the reality of the situation.
--sugarman--

The point missed... (3.66 / 3) (#7)
by farl on Thu Nov 16, 2000 at 05:28:27 PM EST

Nice article. Well written, argued, backed up, and wrong.

Nice response. Well written, argued, backed up, and not wrong at all actually. But I think I should point out that the article was about the future of retail being web business, not the future of web business being retail.

And I do totally agree with you on the B2B issue.


Farl
k5@sketchwork.com
www.sketchwork.com
[ Parent ]
Point taken (3.66 / 3) (#24)
by sugarman on Fri Nov 17, 2000 at 11:30:30 AM EST

Alright, forgive my myopia.

My experience at the retail level has been 'integration', but not really 'web-based'.

I'm thinking of the one IBM commercial with the girl using her cell-phone to pay a coke machine. This 'user-level' interaction is what we are likely to see, but how does this relate to the web as we know it? Digital fund transfer is one part of that, but is more an extension of the debit-card system that has been rolled out and proven popular.

The other commerical that comes to mind is the guy who looks like he is shoplifting in a grocery store, and the scanner at the door records everything in his pockets and automatically debits his account. Nice idea, but it has a whole other set of problems with it (Hey! I already had these pants! I was wearing them when I came in!)

The other part of the effect is that it is often in the retailer's best interest to restrict the flow of information that a customer has at his fingertips about a given product. This is already happening, in places such as Chapters (Canadian bookstore). The terminals have a familiar browser based look to them, but all the data points to the companies own internal DB. No dialing up amazon to see what their price is, no checking other buyer's reviews, etc. But there would be no such restrictions at the back end, between Chapters and the publishers.
--sugarman--
[ Parent ]

b2b2b2b (3.60 / 5) (#10)
by cetan on Thu Nov 16, 2000 at 05:29:42 PM EST

b2b is as much a flavor of the month as p2p

dotcoms that fail at b2c use b2b as a way to convince vc's they really know where it's at...but if they couldn't make b2c work, they won't make b2b work either. When the b2b dotcoms start falling, people will begin touting the fall of the business viability of the net, yet again.

there is no way to predict the pattern of development here. there might be a resurgence of b2c or the whole damn thing might collapse under the weight of it's own banner ads, who knows...

===== cetan www.cetan.com =====
[ Parent ]
PoV (3.00 / 1) (#15)
by sugarman on Thu Nov 16, 2000 at 05:56:01 PM EST

The thing is, inertia I'm seeing for the B2B market is coming from neither dot-coms, nor VC. It is coming from the IT departments of large businesses who are trying to adapt themselves to the web, and from other equally large computer companies who are going after that market. The bigs guys like Sun, EDS, IBM, SAP, CA.

Some dot-coms and VCs can sense the way the wind is blowing, and are positioning themselves in that 'solutions' market. But they are not the driving force in this market. The large ships take a while to change direction, but once they do, they go forward with authority.
--sugarman--
[ Parent ]

comparisons (2.50 / 4) (#12)
by titus-g on Thu Nov 16, 2000 at 05:35:29 PM EST

It might be interesting to look at how the super/mega/hyper stores have effected traditional businesses such as grocers/butchers etc.

Internet stores are in a way a continuance of what happened there...

Not a fan personally, I prefer small businesses rather than international conglomerates. but I still shop at tesco...

ho hum

--"Essentially madness is like charity, it begins at home" --

It's not really the same... (none / 0) (#23)
by MaximumBob on Fri Nov 17, 2000 at 11:13:37 AM EST

That's not a bad thought, but I think you're comparing apples and oranges here.

As much as I like the ability to order things from my dorm room, I'm an incredibly impatient person. Often, when I buy something (a CD, video game, book, whatever) I don't want to wait to listen/play/read it.

Furthermore, there's the obvious "I want to touch it," factor, where people are a little wary of buying something if they can't try it physically, first. That won't stop me from buying some sort of media. It will stop me from buying a car, or a bicycle, or a television, though.

As for your comment on small business vs. international conglomerates: yeah, I know international conglomerates have too much power, but at the same time, I'm a big fan of the distribution networks they've set up that let me buy things for a tenth of what they'd otherwise cost. While I'm morally opposed to a lot of the things they do, I have to admit that I'm not entirely sure I'm willing to do without.

[ Parent ]

Important, but not that important... (4.33 / 3) (#18)
by pb on Thu Nov 16, 2000 at 07:26:04 PM EST

I look at online shopping as a replacement for shopping by phone or by mail-order, not as a replacement for brick-and-mortar stores.

If I want to buy plane tickets, or compare prices, or maybe even look for deals on an auction site, I'll go online. It's easy to comparison-shop online, especially for something as intangible as a plane ticket.

If I want to shop for food or clothes, or see what new books or programs are out, I'll go to a brick-and-mortar store, or maybe even a mall! I'd much rather be able to look at the food before I buy it, or try on the clothes first, or even read the back of the books, or see what's in the "New Releases" section... In short, for common physical goods, I want to go to a real store.

That having been said, for people who primarily sell their products by mail-order, having a website is a wonderful thing. And even if you have a brick-and-mortar store, there's nothing wrong with having a website too; it costs very little compared to an actual store, and can give you more business and publicity. But it won't replace all physical stores...
---
"See what the drooling, ravening, flesh-eating hordes^W^W^W^WKuro5hin.org readers have to say."
-- pwhysall
bookstores... (3.00 / 1) (#20)
by janra on Thu Nov 16, 2000 at 09:15:30 PM EST

These new malls will shift from commodity goods like books, toys and computers, which are far more conveniently marketed on the Internet

hardly. Browsing a bookstore is infinitely easier than browsing a website, for one. If you have a specific book in mind, then the website is easier, certainly, but who really goes out to buy one specific book? Wait, that's what I go *into* a bookstore to do, but I usually seem to come out with more. Now why would a company want to lose impulse buys like that?

Computers I can see, but then I don't buy computers nearly as often as I buy books; those purchases tend to be planned well in advance.

Even toys though - you can't tell from a picture on a website how big it is, (unless they put up the dimensions, but that just isn't the same) how sturdy it is, or whether the joints and seams look like they're going to fall apart any minute.
--
Discuss the art and craft of writing
That's the problem with world domination... Nobody is willing to wait for it anymore, work slowly towards it, drink more and enjoy the ride more.

totally- serendipity is underrated (2.00 / 1) (#21)
by beertopia on Fri Nov 17, 2000 at 02:48:54 AM EST

I agree- there's some things you definitely want to be able to touch/ see in 3 dimensions. The web's great for stuff you already know you want, but pretty lacking for the 'shopping' experience."

As far as I can tell- not that I ever shop there, mind you- Walmart's fabulously sucessful partly because they have freaking *everything* there- you think, "think I'll go down to Walmart & pick up some new tires for the ridin' mower", right, but once you get there, there's all this *other* crap, that you forgot, or never knew, that you wanted, and you end up walking out with a new birdgun, a pair of overalls, a Garth Brooks cd, a roll of film, and 5 lbs of Goldfish crackers. Not that that ever happened to me. But, I bet that doesn't happen much online.

[ Parent ]

More hassle the going to a store so far.... (2.00 / 1) (#22)
by Mantrid on Fri Nov 17, 2000 at 09:00:21 AM EST

I recently dabbled in some online ordering (from a large Canadian electronics retailer). The site itself worked fairly well, I preordered some Dreamcast stuff, and a mini-router for sharing my cable modem. The site happily accepted my store card for payment, I was able to pick separate billing and shipping addresses, and the system did keep me constantly updated with order statuses. Now here was the main problem: Shipping. I live in a fairly small town. The closest branch of the store I was using, is only about 50km, or half an hour away, not that far really, but still far enough to make internet purchases have some appeal to me. The router ships first, fine with me, I get the email notifying me that it's been shipped. A few days go by and I come home one evening to find the purolater slip by my mail box. Drat i missed it! Oh well I figured I'd call purolator and arrange for an evening drop off the next day...whoops, they only deliver during business hours? Oh well, I'll have to go to the depot and pick it up myself, whoops they are 50km away- actually in the same freaking city as the nearest branch of the store. Eventually i had the package rerouted to work - which was fine for the router, it's standard stuff to have delivered here, but all of the dreamcast games and such i just cancelled, as it'd be too much hassle having those delivered to the office. Another point of annoyance - the DC controller I had ordered was an instock item and still hadn't shipped after 3 days!! So for the games i drove to the city and bought them (from another store, not that I'm totally po'd with the consumer electronics store, just that there's an even better game store in that city anyways). Anyways, that was the problem - shipping, and convenience. I might as well have gone to the store to begin with. The one thing that was handy, however, was that router, as it was a special order item. So in the future, for special stuff like that i might buy on the net, but for games, movies, and whatever that are easy to come buy (even if they aren't in the town where I live), I'll just wait until I can physically get to the store to pick them up. Also while in brick and mortar store (esp for games), I got to see all the cool games that were out, and ended up buying a different game anyways.

I often buy online. (3.66 / 3) (#25)
by theR on Fri Nov 17, 2000 at 03:35:16 PM EST

It easier for me, in many cases, to buy online. While I can't ever see doing it for something like groceries, I have bought computer parts, books, CDs, clothes, flowers, and probably a couple of other things I don't remember. Some things, like books, might have to be checked out in a store first, but I have found that you can often get better prices online, even taking into account shipping charges. Especially if you use a site like Techbargains to get a line on deals. I bought a 256MB DIMM of Kingston pc100 for $95 two days ago, free shipping. You would not be able to beat that in a brick and mortar store.

Comparison shopping is definitely easier. I researched for a new car, and when I went into a couple dealerships I new exactly what I wanted to drive and the invoice price of every single item on the cars. I didn't buy online, but I think being able to do the research still has an impact on the business model. I also checked on refrigerators when mine gave out. It gave out on a Sunday night after the stores were closed, but with the internet I was able to narrow it down to a couple models before I went to the store first thing the next morning.

I believe that it helps an online entity to have a brick and mortar partner or parent company. There are plenty of purely online businesses that will succeed, but I think the chances are better if you already have a physical presence. Not only does it mean you are known by more people, it prevents you from having to put all your eggs in one online basket. I also think some people will never buy online. It is a totally different experience to actually enter a store and shop, and some people enjoy that. There are also last minute shoppers. If you need something now, there is no faster way than walking into a store, giving them your money, and walking out with your purchase.

The online model is valid, but you also have to be careful. Sure, it can help some smaller businesses, but I am always wary. It is too easy to get stuck with a product that does not work or is not what you ordered. If I have the choice between a known entity and one I've never seen before, I have to go with the known (if they're known to be reliable). This could be a drawback for the smaller companies, although places like Reseller Ratings can help.



The Holy Grail of Online Shopping | 27 comments (12 topical, 15 editorial, 0 hidden)
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