[August 11,
1999] Taking A Chisel To The
Brick And Mortar
Results of a study released this week by Jupiter
Communications should have traditional brick-and-mortar retailers quaking in their
boots. Jupiter, which focuses its research on the Internet economy, has determined that
approximately 94 percent of sales made online in 2002 will be sales made at the expense of
traditional storefront retailers. The upshot of the Jupiter study is that only about 6
percent of online sales in 2002 will be incremental
sales that would not normally
have occurred via brick-and-mortar storefronts. If we put it in terms of numbers, this
means that only about $720 million of the estimated $11.2 billion that will be spent
online in that year will be sales that would not have been in the hands of traditional
merchants.
Obviously, certain product categories are more vulnerable than others. The study
concluded that low-cost products with a high impulse buy factor (books, music, videos,
computer software and clothing, for example) will be the top items taken out of
traditional sales channels. Computer hardware products ranked high, as well, which makes
sense: logic dictates that individuals looking to buy computer products are Internet-savvy
and are therefore more comfortable with the idea of buying products online. Some
industries are still very safe and will continue to be. The Learjet company, for example,
has little to worry about at this point. (Although I did discover you can order spare
parts online for your Learjet -- keep that in mind.) But on a daily basis, I notice more
unusual and non-traditional e-commerce agreements being forged. I took a look around the
Internet, trying to come up with the most unusual items I could imagine to see if they
could be bought online. (I must admit, the strangest things I could think of are very
strange, indeed.) Looking for surplus army camouflage gear? Try visiting www.soldiercity.com. Run a dairy farm but have no
bulls around to fertilize your cows? No problem: Visit www.wwsires.com
and order what you need (yes, that) online. Having a voodoo ritual on Saturday night but
remembered you are fresh out of the right herbs and oils? That can be easily solved. Visit
www.mechanicaldiva.com.
Companies that want to hide their corporate heads in the sand may cite current
statistics about the size of e-commerce. A study by research firm IntelliQuest found that only about 15 percent of
individuals who use the Internet actually purchase via e-commerce. Granted, retailers
might not be feeling the pinch so hard today. But a study by IntelliQuest conducted late
last year also found that by the end of 1999, consumer e-commerce activities will have
tripled since the end of 1998. It's hard to fight against statistics like that, and all
studies, regardless of the variance of actual predicted numbers, indicate that e-commerce
will grow like a virus in coming years. To date, the traditional online shopper has been a
thirty-something, college-educated white male. Statistics indicate that the number of
women, senior citizens, minorities and lower-income families shopping online is expanding
and will continue to do so as more e-commerce sites attempt to branch out demographically
toward new groups of consumers.
Additionally, the e-commerce giants are working hard to find ways to induce more and
more people to shop online. A recently announced agreement between America Online and Radiant Systems, Inc.
will attempt to physically bring e-commerce into the more progressive brick-and-mortar
stores. The two companies plan to develop consumer interactive services for deployment of
point-of-sale devices. Essentially, the solution will bring Internet access-enabled kiosks
into the retail stores. Consumers can check their e-mail and supplement their physical
shopping experience by surfing around for more product information or do comparison
shopping. This is an interesting solution that will help successful, forward-thinking
companies conducting e-commerce both keep and integrate their physical and virtual
customer channels.
This integration of traditional and non-traditional channels is vital to the health of
a business. The Jupiter study cites this as a common error of which many traditional
merchants attempting an online presence are guilty
attempting to separate their
in-store sales channels from their fledgling online presence. Sales tax considerations and
inexperience with the different merchandising and customer service demands required by
e-commerce are the primary reasons for this, but the brief history of e-commerce has shown
that the more successful ventures are those that use both channels, Web and traditional
selling venues, and allow them to leverage one another with their respective strengths.
Traditional stores have in the past reaped the benefits of the fact that a large
portion of consumers spend about 80 percent of their disposable income within 20 miles of
their homes. This statistic will likely turn around to bite retailers, as a consumer can't
get much closer to their homes than the PC in the corner of the living room. In an era in
which the average American worker's leisure time has drastically declined, choosing to
order items off a Web site rather than wasting a full hour to drive to a store across town
and fight for a parking space is too appealing to resist.
Now
I hate to upset my local cheese maker, but I just found a way to buy my
English Blue Stilton without moving out of my chair.
Tracey S. Roth welcomes your comments at troth@tmcnet.com.
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