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IQ News: Selling on Site

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Manufacturers slowly convert Web sites into stores.
Buy a washing machine with the click of a mouse? The idea may sound ludicrous to most people, accustomed to the eye-before-you-buy method of purchasing durable goods. However, a successful test last spring by Maytag, which allowed visitors to Maytag.com to pre-order its new Neptune washing machine, may be the most robust evidence to date that more and more companies are mulling plans to convert their Web sites into storefronts.
Of course, airlines, regional wineries, telecommunications firms and computer makers have been quick to embrace the Web as a sales channel. Direct PC marketers Gateway 2000 and Dell make a killing through Net sales. Dell claims it has reached $2 million per day in direct sales through its Web site. AT&T, MCI and Sprint have been signing up customers online at a steady clip and every major airline is using its site to book reservations. Not to mention cataloguers and Web-grown businesses like Amazon.com and CDNow.
But what separates Maytag and most manufacturers from all of these companies is their traditional dependence on outside retailers to push product. And those manufacturers are well aware that retailers will almost certainly have resistance to being bypassed in the new, electronic sales loop.
That is why, until recently, most manufacturers with a national retail presence were only willing to sell collectibles and gift items on their site, just as they would through a catalog or 800 number. For example, $16 Coke boxer shorts can be had by calling a toll-free number plastered all over the Coca-Cola Trading Post on coke.com. Pepperidge Farm holiday tins packed with the popular cookies can be ordered on campbellsoup.com with the click of a mouse. Such developments could hardly be classified as brick-and-mortar shaking.
So will the next wave of marketers be the ones who write a new chapter in the so-far slim annals of online commerce? Possibly. But as a number of major apparel companies, auto makers and packaged-goods marketers such as LifeSavers are testing the direct sales waters, it is clear that retailers shouldn't worry just yet.
The online storefronts of most marketers, while more aggressive than in the past, do their best to walk the line between opening up a new, full-blown sales channel and keeping retailers in the electronic loop. As Rishad Tobaccawala, president of Chicago-based interactive agency Giant Step, says, advertisers often discover that the costs outstrip the benefits. "Most of our clients are concerned with the channel conflicts," he says.
Giant Step, a subsidiary of Leo Burnett Co., helped client Maytag sidestep such conflicts when it introduced the Neptune. As the manufacturer, Maytag gave maytag.com visitors the first crack at putting a deposit on the appliance with their credit card in anticipation of the intense demand for the product. When a nearby retailer got the appliance in stock, they would contact the customer. However, the success of the two-month long presale program has prompted Maytag to explore the possibility of not only generating leads but also selling direct from the site, said Giant Step co-founder Eric Heneghan.
Other manufacturers are following suit. Levi's Dockers brand is thinking of selling khakis online, while competitor The Gap is kicking around similar plans. Even General Motors is eyeing the medium as a distribution channel.
For Dockers, the ordering capabilities won't be up and running until the latter half of 1998, if ever. But for now, the San Francisco apparel marketer is seriously considering direct sales on dockers.com because of the third party in the retailing continuum: consumers. According to Heidi Oestrike, brand manager for Dockers, the No. 1 wish of those who send email to the site is that they be able to buy Dockers brand clothing over the Web.
That doesn't mean Dockers intends to pull business away from retailers, Oestrike asserts. The company continues to maintain a comprehensive store locator on the site.
It is likely that direct sales from the Dockers site won't make or break the company, but, in Oestrike's view, it would be an opportunity to reward the brand's most loyal customers. "When your best customers are saying, 'I want to buy online,' you have to listen to them. . . . This is a chance where we can get five stars with our customers," Oestrike says. The direct sales plan, however, is still in its infancy and the company has only just begun consulting with retailers, she adds.
Perhaps the most watched online commerce test will launch on Oct. 15. That's when GM will unveil a test program permitting prospective buyers in select states to order a car electronically--although it's important to note that the orders will come out of dealer, not manufacturer, inventory. The pilot, dubbed GM Buy Power, is designed to give dealers in the test region of California, Oregon, Idaho and Washington leads on prospective car buyers.
"The goal really isn't to eliminate the dealer, or supplement the dealer, or anything like that," says Debbie Craig, interactive marketing manager for Oldsmobile. Besides, tire kicking is an essential part of the car-buying experience that you simply can't duplicate online, she adds.
Such examples underscore that for years to come, the meat and potatoes of most marketers' businesses will continue to be through physical storefronts. But as more and more manufacturers begin to experiment with virtual storefronts, a concurrent increase in direct online sales seems inevitable.
For instance, it might not be too long before manufacturers in some categories such as clothing begin to feel a direct threat from competitors who have the freedom to sell online aggressively. The Gap, for example, would have an advantage over Levi's in that its goods are only distributed through Gap-owned stores, not outside retailers.
That may be why the prospects for electronic commerce have motivated even the most cautious marketers to experiment with selling online. "Anywhere where a product is relatively commoditized, you can sell it online," says Jerry Shereshewsky, vice president of marketing and business development for Yoyodyne, the Irvington, N.Y.-based producer of online incentive programs linked to games.
But the pressure to open an online storefront is bound to come from consumers as well. Internet users have already shown an interest in buying products such as computers, books and travel services electronically, and the list is sure to grow.
"I ordered my computer through [the Gateway 2000 Web site]," says Oldsmobile's Craig. "But that was a $5,000 purchase. Would I do the same for a $30,000 purchase? . . . hmmm, Maybe someday down the road."