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Tracey S. Roth Dot Com Commerce

Managing Editor, [email protected] CENTER Solutions

[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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