Online Retailing Comes of Age 228
The final Christmas shopping figures for 2001 are not in, but some industry analysts believe the new savvy and sensitivity of online retailers might have rescued the U.S. Christmas shopping season in the wake of September 11, when a lot of people either stayed home or tightened their belts. "I can't be quoted on this until the figures are finished," a friend and research analyst e-mailed me, "but I believe online shopping really saved retailing last year. The sites and service are getting so much better, and consumer confidence in them -- especially among women -- is skyrocketing. Online retailing is not only on the rise, it's really getting to be fun and easier. More importantly, they grasp customer service, something almost no software or hardware company yet does."
If that's so, and it definitely matches my personal shopping experiences, it's huge news for the Net. Consumers, chronically abused by the software and hardware industries, were initially anxious about buying things online. They worried about hackers, crackers and security; they faced poor customer service and complex downloading and other problems. But those problems -- unlike similar headaches in the larger computer industry -- are being addressed.
Retailers competing online this holiday season were a lot shrewder, says a story on About.com about the online retailing industry.
About.com cited a survey of 63 retailers who found a successful holiday season marked by a surprisingly effective combination of widespread promotions and discounting. Most consumers hate spam, but it doesn't bother them so much if it's about things they want, and if they're getting something for the attention. Both multichannel and Web-based retailers seemed to have learned a lot from past marketing missteps. The Shop.org/Boston Consulting Group (BCG) found that more advanced retailers, after carefully studying the economics of each online and offline promotion, are finding ways to offer the minimum discounts necessary for increasing sales volume and ways to deliver targeted promotions to the more than 100 million consumers estimated to have used the Net over the holiday season.
Besides that, sites have radically improved their graphics and visual representations of products. As fears about theft and security have subsided, companies have radically upgraded their customer service. This is in striking contrast to tech industries which sell products that are confusing and difficult to use, and either makes themselves unavailable to confused or outraged customers or charge them extortionate fees for "priority service," which is really just the service they would be entitled to for free in any other business.
If you want to see smart web businesses, I'd cite two in particular -- L.L. Bean and Pet Food Direct. L.L. Bean's site architecture is brilliant -- well organized, easy to navigate. It shows clear pictures of all of its products and allows easy customer access to account information, while still providing security. More interestingly, the site offers customers several ways to get instant help -- phone, instant messaging, nearly instant e-mail response. If you're encountering problems, you can simply e-mail or call and a human will respond promptly. This support is crucial to building consumer confidence. A shopper is much more likely to risk buying something online if they know they can get help with any problems. Tech shoppers are among the most distrustful on the planet after years of confusing products and poor service.
Pet Food Direct also offers a different kind of targeted retailing, e-mailing customers weekly about specials, sales and promotions on the products they have already demonstrated they want and use regularly. This isn't quite like spamming, since it's stuff the buyer needs. And the sharp discounts have a way of offsetting any irritation. The site isn't trying to be funny or cute. Rather than promoting a silly sock puppet, it offers heavily discounted pet food and reminds pet owners when they are apt to need it. It also offers sophisticated graphic renderings of products and instant customer service both online and by telephone. The purchase takes seconds. The discounts are heavy enough to attract shoppers attention, but apparently not so heavy to erode profits. One reason is that the site, like L.L. Bean, gives the consumer a variety of shipping choices, from regular mail to next day air. And the customer pays for shipping, choosing exactly how much of a discount he or she wants. In both cases, the sites don't spam -- they target people who have bought and need their products.
Dozens of other sites have similarly polished their presentation, honed their sense of marketing and discounting and, most importantly, invested in tech support and customer service. Shoppers feel secure not only through repeated use, but through the sense that somebody will speak to them if problems arise.
This is something that, alas, computer and software companies still haven't learned.
Good news for us in the middle of nowhere. (Score:3, Interesting)
Being in the middle of nowhere (Upstate Pennsylvania), with the closest mall being about an hour away, almost all my shopping for "special" and "hard to find" things takes place online. I easily spend 80 percent of my alloted "mad money" online. If only FedEx and UPS would commit to getting packages here on time. See, if you are in some areas that they deem "remote", they don't honor any type of delivery guarantee.
Other smart sites (Score:2, Interesting)
sigh. (Score:4, Interesting)
>This is something that, alas, computer and
>software companies still haven't learned.
Gateway and Dell is a pretty big difference from Amazon, LL Bean, and pet food. People buy media, books, food, clothes on a monthly basis.
I mean, do you think Dell should send emails saying, "As someone who bought a hard drive in the recent past, you might be interested in our hard drive specials this week!"
Different businesses, different marketing. Then again, you didn't have to think about it because you're Jon Katz, and its been demonstrated that your articles don't have to make sense.
It seems pretty simple to me: (Score:4, Interesting)
2. Juggernauts like Amazon.com have weathered the storm and can finally mark up their goods a bit. They got our attention with low prices and cheap delivery, taking enormous losses. Now we're used to Amazon-ing all our Christmas presents and don't mind paying a little extra for it.
Comment removed (Score:5, Interesting)
Online B&M is the key. (Score:2, Interesting)
One thing Katz didn't mention was the importance of an online retailer having a "brick and mortar" presence. Amazon takes orders for Toys 'R Us and Target. Other stores strongly link their online stores with their B&M chains. For example, Best Buy and Circuit City allow you to return purchases made online. However, Staples treats their online store as if it were a completely different entity. Last I heard, Staples.com was still loosing money hand over fist.
There was one thing Katz got dead on: it's all about women. Men buy stuff, but women shop. Ever go to a department store like Macy's? All of the men's stuff is in one spot in the store. Women's clothing is spread out over different floors. I think you are going to see the successful online retailers try to find out what women want in an online shopping experience and try to make it a reality. If so, returning merchandise is going to be a big thing for women. Obviously, the B&M retailers have an advantage here. Why go through the bother of shipping it back when you could drop it off during your errands?
Nothing New (Score:3, Interesting)
Online retailing hasn't come of age because "online" retailing as a separate type of retail business doesn't really exist. Most of the retailing going on is nothing more than another form of catalog retailing. The only real difference is that the retailer's catalog is more widely available. The people who've done well in online retailing are the people who've done well in catalog sales. LL Bean is a good example that. I dunno if Amazon is an example of much of anything other than how to siphon off VC funds.
The interesting field of online commerce to me is that of retailing services online and brokering. Neither of these has really come of age yet. However, Ebay has been an early success in the area of brokering goods and services. Online travel is another success in this area. I mean how many of us actually buy airline tickets through an agent anymore?
And lets not forget the money markets (Score:3, Interesting)
Also from my experience internet service has not improved and the interfaces that sites are using to process orders and give service is still generally poor. Unfortunately I do not think that the Darwinian law of Survival of the Fittest really applies to the last tech sector down turn. Unless the fittest means those that still have financing in place. The death rate on the internet may have dropped, but there is still more to come.
Re:What e-commerce is and what it isn't... (Score:2, Interesting)
And yet, I've never ordered anything via mail order, ever. But, I order stuff online all the time. I've spent thousands of dollars online at dozens of retailers. So, if it's exactly the same thing, why do I use it, but don't use mail order?
You could make the argument that I'm just irrational. That's fine, but it still doesn't change the fact that there is something about e-commerce that appeals to me (as a consumer), and mail order doesn't.
Customer Support vs Technical Support (Score:2, Interesting)
BOTH are customer service issues, and BOTH are huge opportunities for a company to shine in the relationship department with their clients. However, neither of them are free. While one may not charge the customer up front for the service, both of them generate overhead in the form of manpower, office space and benefits (remember those?). New concept here: the purpose of a business is to Make Money; not sure, but I think that is why they call it a business. So, if one is not charging for their customer service, chances are good that they are either rolling up the cost into their product prices, averaging the support costs over their entire customer base, OR they are eating it, and will likely be in the red soon. This may not be true in every case, but certainly is when dealing with a staff dedicated to support issues.
FACT: People still like "real" stores (Score:2, Interesting)
However, most people prefer to shop in person. They like to touch the merchandise, maybe even talk to someone about the product. And if they take it home and it doesn't work, they like to be able to drive back to the store and return it.
Returning purchases made online is a mixed bag at best. Sending the item back usually involves a loss on your part. Even if the retailer pays return postage (how many do that?) you still have the hassle of shipping the item.
Another thing that happens when you return a product to a real store is that you typically buy something else there. This doesn't happen online.
Online shopping isn't going away, but IMO it isn't going to grow much larger then it is now.
Why Amazon and Egghead and ... (Score:4, Interesting)
Both have intelligently designed websites, good prices, good availability and, perhaps above all, reasonably priced and quick shipping. Both of these companies have been in business nearly as long (if not as long -- I'm just using my memory) as Amazon, without resorting to the bizarre expansions and gimicks.
Why we should judge online retailing by Amazon.com is beyond me. I suppose one argument is that Amazon sells a wide range of books, whereas Bookpool specializes in a niche market. I bevelive this is a bogus argument: the internet is all about niche markets, and attempts to use it otherwise are stupid. Television is a way to force your message down every person's throats. The internet is a way for people to find what they *want*.
The niche-nature of the internet has been demonstrated many times, perhaps foremost by Katz when releasing "Run to the Mountain" -- if I remember correctly, he even made it into Amazon's top ten for while. Certainly this didn't happen because of anything Amazon did (except to be known as a book seller, which they're leaving behind). It happened because of Katz's niche marketing.
Who cares if Sears fails online? I'll drive to their store and talk to their staff if I don't know which tool I need, but I need it now or want to see it first. If I know what tool I want, or I don't need it now or don't need to see it first, I'll research tools on the web, and then look for an online vendor with good prices and policies. Is Sears likely to be this online vendor? No. When shopping for computer parts, is CompUSA's online service compelling? No -- their prices are sometimes good, but their shipping is horribly slow (their best is "usu. w/in 2 days", as opposed to "orders by 3PST will be shipped same day").
Is Amazon likely to have the best price on technical books while Bookpool is around? No. Amazon seems to be aiming for "online Walmart" status. However, Walmart succeeded because they could keep their prices low and provide a little of everything (though most of nothing) to geographic communities. Online, geography is irrelevant (except when you ship ground, and if warehouses are distributed then even ground shipping can be fast). As a result, finding a sizeable customer base is easier. That means niche retailers can buy bulk and keep their prices down. Furthermore, niche retailers are likely to carry higher quality goods than Walmart and know more about their products than Walmart.
So why would you go to Walmart, unless they're the only store with what you wanted (which is unlikely)? I expect that if Amazon is still around in 10 years, we'll think of them like Walmart or K-Mart, except less convenient than these stores.
-Paul Komarek
Re:Amazon.com profit didn't come from book sales (Score:2, Interesting)
amazon has a large amount of cash on hand. they moved this around in the financial markets last quarter, and happened to make quite a killing. if this weren't factored in, they still lost money.
so yes, Amazon.com made money from good business practices, but not from selling coffee table books.
Re:"Death" of Retail (Score:2, Interesting)
Here (in the UK), the catalogues are very popular with girls: you get a free ~1Kpage glossy catalogue to flick through, and if you see anything you like, you just return the (pre-paid) form, stating the garment number and your size. The thing arrives in a few weeks, and shortly afterwards you get a statement (and a new catalogue every season). So long as you pay off something like 5% of what you owe them every month, you're free to keep on ordering until your wardrobe bursts.
Seems to me that if this is a viable business model, surely people could be persuaded to sign up for an internet-based equivalent, particularly if they delivered the goods as quickly as Amazon (often I used to order books, standard delivery, last thing in the evening before I left work at 5pm; and would come in at 8am the next morning to find them waiting on my desk).
Well, sure - they're selling our personal info (Score:2, Interesting)
When that story broke, I logged in and removed all my personal information. I haven't shopped there since.
Maybe they finally turned a profit by selling "their" business asset to a bunch of other retailers or maybe even Russian credit card number blackmailers.
Re:Amazon.com (Score:1, Interesting)