Adweek 2000 Media and Technology: The Future Is Here




Marketers that prosper tomorrow must master the basics of e-tailing today
Forget battling department stores at Christmas, drugstores on your lunch hour and bookstores on your way to catch a plane. If you aren’t buying furniture at midnight in your pajamas or pretending to run spreadsheets at work while you’re really shopping for cheap plane tickets, you’re nothing but a Luddite with a bad parking space at the mall.
The ease and ubiquity of online shopping and it’s drop-dead trendiness ensure that the consumer e-tail space is poised for exceptional post 2000 growth.
According to Cambridge, Mass.-based Forrester Research, 1999 consumer e-commerce spending–excluding financial services and auctions–will surpass $17 billion. By 2003, that number will reach $125 billion.
But as often happens with the Internet, the enthusiasm generated by the promise of future technology overshadows today’s reality. Many e-commerce players haven’t yet achieved the basics of customer retention, return policies and database management–the of on-and-offline retail success. Yet they focus on that rosy time when advances in technology, including broadband, will make the dreams of consumers and e-tailers come true.
Indeed, the siren song of broadband promises always-on Internet connections, faster transactions and more elaborate Web sites. Virtual stores will be able to display their wares with much more elaborate eye-candy–from 3-D imaging to full audio–and video-enhanced shopping experiences, which will further distance online shopping from traditional catalogs. Shopping that is more engaging immediately translates into increased sales, according to industry experts.
“The informed online consumer often buys more products–and more expensive ones–on the basis of well-presented information about the product,” says Bob Smith, executive director of Shop.org, a not-for-profit trade association for online retailers. “More retailers are recognizing this and are adding content and features that consumers just can’t find at brick-and-mortar stores or in catalogs.”
Of course, marketers dream of the day when a consumer watching a TV show sees a favorite character in the latest fashions, reaches for the remote, clicks on the outfit, puts the remote down and reaches for a pint of ice cream; meanwhile, a clothing manufacturer wraps up the package and fires it off to her home. The scenario would be complete if the consumer was so pleased with the experience that she was ready to do it all over again the next night.
QVC 2.0: Aim for instant gratification on both sides of the equation.
It’s a totem of how fiercely the industry craves broadband that even those who shy away from predictions can’t seem to stop themselves from forecasting, anyway.
“I think it’s somewhat futile [to look ahead] more than three years because we don’t know what effect broadband is going to have online,” says Chuck Davis, president of e-commerce for Disney’s Buena Vista Internet Group, North Hollywood, Calif. Yet he admits the TV approach that broadband brings is “going to be very powerful.”
Observers caution that the industry is in danger of getting ahead of itself; that e-commerce players better learn to swim in the shallow end before diving into the deep end.
“It’s easy to get caught up in a discussion of cool new technologies when talking about ‘the next big thing’ in online commerce,” says Fiona Swerdlow, practice director for digital commerce strategies at New York-based Internet analyst firm Jupiter Communications. “However, online commerce players have to get the basics sorted out first — customer service, fulfillment, customer retention, distribution–for online commerce to really take off. It’s shocking that these basics aren’t something that online retailers have already nailed.”
As any veteran online shopper will tell you, it’s still pathetically easy to find online stores that don’t deliver merchandise when they say they will, or provide a simple recourse when a buyer wants to return a purchase.
The challenges will be constant for sites, says Farhad Mohit, president and CEO of Bizrate.com, Los Angeles, which conducts customer surveys to measure e-commerce satisfaction. “Consumers will demand the best from a vendor each time they transact,” he predicts. “If they don’t receive this, they will switch to another vendor for the next purchase. In essence, the vendor will have to earn a customer’s business on each and every transaction.”
All together now: The competition is only one click away.
“When you are on the Web browsing, there’s a marginal cost of going to the next store and checking them out,” says Peter Neupert, president and CEO of drugstore.com, Bellevue, Wash., by way of explaining what has become an industry mantra. After all, it takes time to travel to traditional stores, so customers typically don’t leave without making a purchase.
The customer satisfaction solutions for sites such as drugstore.com (whose largest investor is Amazon.com) hardly resemble the scenario of letting a consumer casually purchase Gwyneth Paltrow’s Oscar gown simply by pushing a button. Drugstore.com’s offerings include allowing people to order prescriptions online for same-day pickup at any Rite Aid store.
That twist only scratches the surface of what online retailers might do to lure, and keep, customers. Analysts point to a trifecta of commerce, content and community as ways for sites to encourage e-commerce loyalties. While consumers might not be interested in discussing their experiences with Prozac with other drugstore.com visitors, they may want to find out more about the drug at the site, or at some other online pharmacy, thus tightening the bond between buyer and seller.
“The three tenets have captured the entrepreneur’s imagination,” says Seema Williams, consumer e-commerce analyst for Forrester Research. “They envision using these three pillars to create essentially new lifestyle retail outlets. I think these folks are going to become expert at merchandising products around both content and community.”
For example, creating an e-tailer-based opportunity to discuss a best-selling author’s upcoming book approaches the sexy vision of what e-commerce could be. But it also requires some mundane behind-the-scenes support to make it happen. Someone has to manage the sophisticated database system that spews out targeted e-mail inviting people who have previously bought that author’s books online to participate.
The support services that e-tailers will need, says Meredith Medland, director of The Sharper Image’s Internet division, based in San Francisco, include data-mining specialists, trend spotters who can consult on a site’s merchandising, media experts and all of the software that comes with them. And, Medland argues, e-tailers must also recognize that they are targeting a new type of demographic, what she calls the “e-generation”–customers who are wired and connected, consumers who are experienced online buyers.
“This is a whole new generation who could be as young as 18 or as old as 70. This is a generation that has allowed technology to flood into their personal and professional life. They welcome the advantages that the e-environment brings to them,” she says.
Only when e-tailers have dealt with significant ancillary issues will they be ready to move to the next level, using technology and creativity to jazz up their virtual storefronts to lure consumers.
“We are going to have to entice them, entertain them and make them want to buy products,” says Ken Seiff, CEO of discount clothing and accessory site Bluefly.com, New York, which has made a name for itself hawking Prada bags and Donna Karan clothes at (relatively) low prices since 1998.
Therefore, as competition in the online marketplace heats up across all post-2000 retail segments, the winners will be exactly who they should be, according to the metaphysics of marketing.
“The big winners in this are clearly consumers–big winners, in every dimension–whether it’s the price dimension, the convenience dimension, the selection dimension,” says Neupert.
As the dream gets closer, there’s a grand irony involved in predicting which retailers will win consumers’ hearts. In a contest between click-and-mortar retailers and nothing-but-Nets, analysts vote for the click-and-mortars.
“We believe that to accurately capture a full picture of a shopper’s spending habits, merchants must sell both online and in traditional stores,” says Williams. “Those who manage to straddle the channels with a seamless shopping experience will win customer dollars.”
This is music to the ears of large traditional businesses that have opened their shops on the Net. It may have taken the prodding of upstart sites stealing business, but companies such as Barnes & Noble and Disney are betting their brands on a combination of an online presence and good old-fashioned stores.
And the triumph of clicks-and-bricks, some argue, will be apparent before the click-on-a-dress-and-buy vision becomes reality.
“There are going to be so many new sites out there this holiday season that the
consumer is going to be on overload trying to figure out which sites they should shop,” says Davis. He and other offline-online retailers say customers will migrate to the sites of the shops they recognize.
Yet there’s a glitch to these predictions.
When Gen Y comes into its own, nothing-but-Nets may find they carry as much weight with consumers as their everyday rivals, since the new consumers have been equally exposed to both. It’s hard to feel good about perusing your favorite CD store when every CD in your rack came to your door via United Parcel Service.
How will it all shake out?
“Its hard to say,” admits Carl Rosendorf, who, as senior vice president of barnesandnoble.com, New York, has had to compete against the behemoth of online retail, Amazon.com.
“I think the consumers will vote through their purchases on which stores–and which means of purchasing–they feel most comfortable with,” says Rosendorf. “They are the ultimate judge, frankly, and it’s too early to predict or project where it all may go.